Industrial Location

1. Industrial Location Chapter 4 1

2. Three Isoquants 2

3. Isocost curve 3

4. Slope of isoquant • For a production function with two inputs, • Along an isoquant, the change in output is zero, so • Therefore, 4

5. Equilibrium for a Firm • Slope of Isoquant = Slope of Isocost or 5

6. Isocost curve and isoquant map showing a firm’s equilibrium 6

7. Resource use based on location 7

8. Pine Grove Boughs:$150 per load Wages:$400 / week Urban Center Boughs:$250 per load Wages:$200 / week Pine Grove vs Urban Center 8

9. Pine Grove For $1,000, the firm makes 300 wreaths per week, and Uses 5.253 loads of pine and 0.53 units of labor TC = $1,000 = ($150  5.253) + ($400  0.53). For $2,000, the firm makes 800 wreaths per week, and Uses 8 loads of pine and 2 units of labor TC = 2,000 = ($150  8) + ($400  2) Urban Center For $2,000 the firm makes 800 wreaths per week, and Uses 4.4 loads of pine and 4.5 units of labor TC = $2,000 = ($250  4.4) + ($200  4.5). For $3,000, the firm makes 1,500 wreaths per week, and Uses 5.6 loads of pine and 8 full-time workers. TC = $3,000 = ($250  5.6) + ($200  8). Three isocost curves for $1,000, $2,000, and $3,000 9

10. Long–run average cost curve 10

11. Location orientation chart 11

12. Long–haul economies 12

13. 13

14. Total Transport Costs 14

15. 15

16. Firm location on non–linear routes 16