| Abstract: | Although Thünen's rent theory has been formalized and extended, his interdependent spatial theory of factor intensities has received little attention. The solution must be developed from a fully specified rent equation that recognizes the dependence of outputs on inputs, and the important distinction between fixed and variable costs. A general solution is found for the one-market, one-productive-factor case, with the limiting restriction that marginal revenue productivity must be rising more slowly than marginal costs. The flexibility and power of Thünen's model is shown by developing, from the general solution, scenarios under various market and production conditions. |
