Gce Model Questions Vol1 2020 Geography Question 33

An industrial firm must locate a plant to process 5 000 t of raw material per year from a mine and ship the finished product to a market. Two sites are under consideration:\n\n- Site A: 40 km from the mine, 150 km from the market.\n- Site B: 80 km from the mine, 100 km from the market.\n\nTransport cost is \$0.05 per tonne‑kilometre for raw material and \$0.08 per tonne‑kilometre for the finished product. Fixed production cost at either site is \$200 000 per year. Annual labour cost at Site A is \$150 000; Site B offers a 10 % lower wage. Additionally, agglomeration economies at Site A reduce total variable cost (transport plus labour) by 5 %. Which site gives the lower total annual cost and by how much?