Assume wheat is selling for $4.00 per bushel in Area A and selling for $3.70 per...

Assume wheat is selling for $4.00 per bushel in Area A and selling for $3.70 per bushel in Area B. Further assume transfer costs between Area A and Area B is $0.35. What would you do? Explain. Show your work where appropriate.

Expert Solution

If price of bushel is $4.00 in area A and $3.70 in area B

Cost of transfer between area A and B is $0.35, I should let market in area A and B to work without interference. I should interfere if transfer cost between A and B is less than $0.30 such that I can earn a profit by buying from cheaper market and selling in other market which will help me in generating profit.

Rahul Sunny answered 2 years ago

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