Question: Suppose a company must service customers lying in an area of A sq mi with n warehouses. Kolesar and Blum have shown that the average distance between a warehouse and a customer is
width = √(A/n)
Assume that it costs the company $60,000 per year to maintain a warehouse and $400,000 to build a warehouse.
(Assume that a $400,000 cost is equivalent to forever incurring a cost of $40,000 per year.) The company fills 160,000 orders per year, and the shipping cost per order is $1 per mile. If the company serves an area of 100 sq mi, then how many warehouses should it have?