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(Solved) You own a cloud storage firm with two different locations. Because things are largely automated, we can think of output at your firm as determined...


You own a cloud storage firm with two different locations. Because things are largely automated, we can think of output at your firm as determined entirely by the servers. At your downtown location you replaced all of the servers a few years ago, so they all produce exactly the same amount per hour. At your suburban location, you have one brand new, very fast, server and a handful of old very slow servers. You have the ability to determine how much web traffic goes to each location. Assume there’s no limit to how much data either location can store, so the only difference is the speed with which data can be stored and accessed. Your goal is to make data access as fast as possible for your customers and as cheap as possible for you. 1 Graph the production functions for each location and explain why they have these respective shapes. 2 Assuming that both locations have the same fixed costs, graph the total cost curves for each location. Explain the shapes. 3 Using the concepts of either marginal cost or marginal product, if your cloud storage firm stores a fairly small amount of data, which location should the majority of the data be stored at? Explain. 4 If you are storing a very large amount of data, which location should wind up storing the bulk of the data? Explain

 


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