A firm processing fresh oil palm bunches into crude palm oil establishes its mill directly adjacent to plantations in Imo State, whereas a industrial bakery producing bread establishes its plant near high-density urban residential centers in Lagos. Based on industrial location principles, what primary economic rationale accounts for the contrasting site choices of these two production activities?
- Palm oil processing involves a weight-losing raw material requiring proximity to the input source, whereas bread baking is a weight-gaining process requiring proximity to the consumer market.Answer
- BThe palm oil mill exemplifies the localization of an industry, whereas the urban bakery represents the geographic location of an individual firm.
- CThe palm oil mill benefits primarily from external economies of scale, while the bakery relies exclusively on internal economies of scale.
- DThe palm oil mill is established under state industrial decentralization policy, whereas the bakery is driven by industrial agglomeration economies.
Answer
Palm oil processing involves a weight-losing raw material requiring proximity to the input source, whereas bread baking is a weight-gaining process requiring proximity to the consumer market.
Industrial location theory dictates that when processing leads to a substantial loss in weight or volume (as in converting bulky oil palm fruit to concentrated oil), total transport cost is minimized by placing the factory near the raw material. In contrast, when production increases bulk or weight (as in adding liquid ingredients to flour to yield bread), the enterprise minimizes distribution costs by situating near final consumers.
Step-by-Step Solution
Key Concept
Weight-losing vs Weight-gaining Industrial Location Theory