Firm 1 has a single retail location at the left hand extreme point of a mile-long Main Street while firm 2 is located at the right hand extreme. There are 100 consumers who are evenly distributed over this market. The value of the product sold is V=$10 to any consumer. The marginal cost of production is $1.40 to firm 1 and $3.20 to firm 2. The transportation cost is $1 per mile.

Use the red line (cross symbol) to draw the valuation, V, across the market. Use the orange line (square symbol) to draw the full price line for those who purchase from firm 1, i.e., the line showing the price paid by a consumer plus transport cost. Use the purple line (diamond symbol) to draw the full price line for those who purchase from firm 2. Use the X drop tool to mark the location of marginal consumers who are indifferent between buying from firm 1 or firm 2