Problem Set 1 - EC 330, Summer 2015 Your name: _ University...

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EC 330, Summer 2015Your name: _________________________University of OregonStudent ID #: _________________________Problem Set #1Due in lecture Thursday, July 30th, 2015.No late problem sets accepted!NOTE: To ensure proper grading, write your answers in the area indicated.1.End of Line(6 points)The city of Terminus lies at the western end of a rail line.To the east are a hundred miles ofwide plains along which there are several towns—all connected to Terminus by the rail line.To the west of Terminusare fifty miles of mountains, whose small villages are connected by a few winding dirt roads.The only factory in the region is in Terminus.It produces widgets at a cost of \$10 per unit at the factory door.Thanks to the rail line, the transport cost to anywhere east of Terminus is \$0.10 per mile.Given the poor state of theroads through the mountains, the transport costs to anywhere west of Terminus is \$0.50 per mile.a.Graph the costs of widgets produced throughout the entire 150-mile region.Carefully label the costs at thefactory, at the far western end of the region, and at the far eastern end of the region.b.Assume that the cost of making a widget at home is \$18.What is the market area for the factory?(That is, howmany miles west of Terminus will it stretch, and how many miles east of Terminus will it stretch?)Show yourwork.TerminusCost (in \$)← westeast →
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EC 330, Summer 2015Problem Set 1University of OregonIn reality, one of the key inputs for widgets is easier for the residents of the eastern plains to acquire.For allremaining parts of the problem, assume that the cost of making widgets at home anywhere east of Terminus isactually \$16, and the cost of making widgets at home is \$20 anywhere west of Terminus.c.Now what is the market area for the factory?(That is, how many miles west of Terminus will it stretch, and howmany miles east of Terminus will it stretch?)Show your work.
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