In the year of 1800, a firm was producing metal goods using metal which was imported through the port and unpaid slaves who had quarters 10 miles away from the port and were transported using horse pulled cart to the factory every morning and were transported to the quarter in the evening in the same horse pulled cart. The owner of the factory paid for the transportation. We assume that the firm uses $\$100$ worth of metal to produce $90$ units of output which is sold at price of $\$2$ per unit.

a. If transportation cost of metal is $\$4$ per mile and transportation cost of the slaves is $\$2$ per mile, draw the firm’s bid curve. Label it properly.

b. In the same diagram show the change of bid curve (if any) when the slaves are liberated and act as a labor union. The firm pays the union $\$50$ and pays for their transportation (at the previous rate) as well. Label it properly.

c. From part b, in the same diagram, show what happens to the bid curve when transportation cost of metal decreases to $\$2$ per mile due to introduction of trucks. Draw the bid curves between $x=0$ to $x=10$, where $x$ is distance from the port.

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put on hold as off-topic by Giskard, Herr K., Ubiquitous Nov 8 at 22:03

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