ABSTRACT
This chapter explores shipping models that explain the competitive behavior of manufacturing firms. It modifies the assumption that resources are equally distributed over a homogeneous plain. The chapter explains pockets of dense population, as well as immovable resources such as lakes, rivers, mountains, forests, and coal mines. It investigates what a least-cost location entails. Because firms can substitute various quantities of each input for one another, finding a least-cost location involves more than a comparison of the cost of inputs at different potential sites. The chapter examines the influence of internal economies of scale on location choice. It discovers that there are a limited number of potential locations that can minimize total costs from the transportation models. According to the least-cost theory of industrial location, the producer chooses a site that minimizes the sum of total production plus transportation costs. The chapter establishes the concept of long-haul economies, where the transportation rates over long distances are nonlinear.
