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

Short answer amp essay questionsyou must complete two short

Short Answer & Essay Questions You must complete two Short answer questions and one Essay question All answers must be in the form of a paragraph (minimum of 5 sentences per paragraph). Please select from below: Short An ...

Assignmentthe paper is on googles business ethics in the

Assignment The paper is on Google's Business Ethics in the area of Sustainability. How does Google contribute or detract from various aspects of sustainability? Sustainable businesses make products and services which fil ...

Mcdonalds and the hindu culturein many ways mcdonalds

McDonald's and the Hindu Culture In many ways, McDonald's Corporation has written the book on global expansion. Every day, on average, somewhere around the world 4.2 new McDonald's restaurants are opened. By 2003, the co ...

Assignmentwhat are the most important knowledge assets at

Assignment What are the most important knowledge assets at Dirt Bikes? What functions and employee positions are responsible for creating, distributing, and using these knowledge assets? Are all of these assets explicit ...

Assignmentpart idirections read the prompts below and

Assignment PART I Directions: Read the prompts below and formulate a response of at least one half of one page in length for each question. Please show Your references on a reference page 1. Explain records checks. List ...

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 ...

Assignment sustainability at top shelf shoesin this course

Assignment: Sustainability at Top Shelf Shoes In this course, you will work independently to analyze sustainability issues for a hypothetical organization. The assignments follow one another so that you can apply the met ...

Assignment-money and pricesjaydeethe organizations

Assignment-Money and Prices Jaydee The organization's strategic plan you wrote about in Week 2 calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over ...

Assignmentone responsibility of an information assurance

Assignment One responsibility of an information assurance professional is to work with the organization's security team to explain risk assessment and report findings to executives. The report is likely to involve sensit ...

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 ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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