Minimizing Shipping Costs

question 259

Short Answer

Minimizing Shipping Costs. Towns A, B, C, and D are located as shown in the figure. Two highways link town A to town D. Route 1 runs from town A to town D via town B, and Route 2 runs from town A to town D via town C. Suppose a fleet of 100 automobiles are to be shipped from an assembly plant in town A to town D. They may be shipped either by freight train along Route 1 at a cost of 20¢/mile/automobile or by truck along Route 2 at a cost of 18¢/mile/automobile.
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Which means of transportation minimizes the shipping cost?
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__________
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What are the net savings?
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$__________

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Definitions:

Cartel

A formal agreement among firms (or countries) in an industry to set the price of a product and establish the outputs of the individual firms (or countries) or to divide the market for the product geographically.

Monopoly Price

The price set by a monopolist, which is typically higher than in competitive markets, reflecting the monopolist's market power and lack of competition.

Patents and Copyrights

Legal tools that give creators and inventors exclusive rights to their creations and inventions for a certain period, encouraging innovation.

Collude

When two or more firms agree to work together, usually secretly, to limit competition and increase prices.