Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

A city is comprised of firms in a competitive industry (with no externalities) that produced a good or services that sells for price of p, which is taken as given by firms and does not vary with location. Output of the firms is represented by a Cobb-Douglas production function:

Q(x) = A(x)E^alpha*L^(1-alpha)

where x is the distance to the city center, E is labor (# of workers), L is land and A represents "total factor productivity"-it represents the state of technology and therefore determines the productivity of labor and land together. We assume that A'(x)<0, so that due to knowledge spillovers and other agglomeration effects, technology is more productive the closer the firm is to the city center. This generates a mechanism whereby firms will have incentives to locate closer to the city center, as households do in the textbook version of the monocentric city model.

We also assume that labor earns wage w and that land earns rent v(x). Note that we assume that v depends on x, allowing land rent to vary by distance from city center. Since this is a competitive industry, in long-run equilibrium, firms must earn zero economic profit. So total revenue and total cost must equal: pQ(x)=wE+v(x)L

a) Note that since this is competitive industry with constant returns to scale, the problem facing a representative firm is identical to the problem facing the industry as a whole. So, we solve the problem for the industry here. Set up the maximization problem and solve for the first order conditions for E, L, and x.

b) Demonstrate that the bid-rent function has the normal, negative slope.

c) Combine the first order conditions for E and L and derive an expression showing that land density, E/L, as a function of v(x) and w. Interpret this expression. (Divide one FOC by the other, get expression for E/L and then take natural logs)

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M938948

Have any Question? 


Related Questions in Microeconomics

Watch the video on the link belowthen answer the following

Watch the video on the link below. Then answer the following questions: 1. Would the incentives discussed in the video be able to work in a college setting? Why or why not? 2. Have you ever changed your behavior because ...

Microeconomics assignmentdiscussion forumnote the video has

Microeconomics Assignment DISCUSSION Forum Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu. This week's discu ...

Microeconomicsdiscussion forumnote the video has closed

Microeconomics DISCUSSION Forum Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu. Note: The video has Closed C ...

Assignment economics read the following case study and

ASSIGNMENT: ECONOMICS Read the following case study and answer the given question. THE MACROECONOMICS OF POVERTY REDUCTION: THE CASE STUDY OF BANGLADESH Adapted: Osmani, S.R; Mahmud, W; Sen, B; Dagdeviren, H; and Seth, A ...

Three paragarphs economicswrite 3 paragraphs answering the

Three paragarphs Economics Write 3 paragraphs answering the following questions: 1. How does each of the following relate to the financial crisis of 2007-2008: declines in real estate values, sub-prime mortgage loans, an ...

Topic minimum wage workers who actually are minimum wage

Topic: Minimum wage workers _ Who actually are minimum wage workers? _ What are the profites of raising minimum wage? _ What are the con's of raising minimum wage? _ What in your opinion should we do about minimum wage?

Essay questionyour manager knows that you have completed a

Essay Question Your manager knows that you have completed a course in Purchasing and Materials Management. Your manager would like you to write an essay for your fellow workers about the key purchasing/ supply management ...

Intermediate microeconomics assignmentexercise 1 -

INTERMEDIATE MICROECONOMICS ASSIGNMENT Exercise 1 - Capturing surplus using a block pricing Consider a monopolist facing a linear demand p(q) = 20 - q, and marginal cost MC = 2. a) If the monopolist charges the same pric ...

Assignmentteamworkhow does effective teamwork look how is

Assignment Teamwork How does effective teamwork look? How is teamwork displayed in your life as it relates to your current role? Why is teamwork a necessity for organizations? Does this help or hurt an organization if te ...

Project-listen to this video asafter you work on your graph

Project- Listen to this video as/after you work on your graph. The lecture is on the 'Aftermath of the Financial Crisis' given by Ben Bernanke in March 29 th 2012. https://www.c-span.org/video/?305198-1/ben-bernanke-lect ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen