Assume That Total Demand in a Market Is 1 and That

question 80

Multiple Choice

Assume that total demand in a market is 1 and that customers are uniformly spread across the line segment from 0 to 1.There are only two companies in the market and there is no cost or service advantage held be either Firm 1 or Firm 2.Firm 1 locates at point a,and Firm 2 locates at point 1-b as shown in the figure.A customer chooses one firm or the other solely on the basis of distance travelled.

-If the two firms compete on price and the customer incurs transportation cost,it may be optimal for the two firms to locate at the point(s)

• A)a = 0;b = 1
• B)a = 1 - 3b;b = \(\frac { 1 - a } { 3 }\)
• C)a = ;b = 1 - 3a \(\frac { 1 - b } { 3 }\)
• D)a = ;b = \(\frac { 1 } { 2 }\) \(\frac { 1 } { 2 }\)

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Definitions:

Cost Data

Information related to the cost of goods or services, including production, labor, and materials costs.

Job Order

A custom or special order detailing the work to be performed or products to be produced.

Process Costing System

An accounting method used when identical or similar products are mass-produced, allocating costs based on process departments.

Work In Process

Items or products that are in the production phase but have not yet been completed, often considered a type of inventory on the balance sheet.