Chapter 1 - where do firms locate

Question 1

• Classical model has four assumptions:

Answer 1

1.Single transportable output
• Transported from production facility to output market
2.Single transportable input
• May use several inputs, but only one is transported from source to production facility
• Others are available everywhere
3.Fixed factor proportions
• Firm produces fixed quantity with fixed amounts of each input
• There is no factor substitution (regardless of prices)
4.Fixed prices
• Firm is small that it does not influence the prices of its product or inputs

Question 2

resource oriented firm characteristics:

Answer 2

high transport input cost
involved in weight loss activity
firm is resource oriented because monetary weight of the transportable input exceeds the monetary weight of its output

Question 3

market oriented firm characteristics:

Answer 3

high transport output to market cost

weight gain activity

Question 4

labour, energy and agglomeration economies

Answer 4

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