A firm produces output through the use of capital, ?, and land, ?. The price of...

A firm produces output through the use of capital, ?, and land, ?. The price of capital is constant, ?, but the price of land, ?, is a decreasing function of its distance, ?, from a distribution center. The firm must ship its output from its factory to the distribution center; transportation costs are ? dollars per mile per unit of output shipped.

a) Set up the firm’s cost minimization problem.

b) Derive the system of equations that describes the firm’s optimal choices of ?, ?, and ?.

c) Provide an intuitive explanation for this system of equations.

Please help , Thank you!!!

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Expert Solution

Rahul Sunny answered 1 year ago

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