+1-415-315-9853

info@mywordsolution.com

## Economics

 Basic Economics Macroeconomics Microeconomics Business Economics Econometrics International Economics Managerial Economics Game Theory Public Economics

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

### Assignmentin this assignment you will discuss the role of

Assignment In this assignment, you will discuss the role of entrepreneurship in improving the economic condition of countries and individuals and understand the manner in which this perception has spread around the world ...

### Q1 in quantity theory of money model mv py assume that v

Q1. In quantity theory of money model, MV = PY, assume that V is constant, M is growing at 6% per year, Y is growing at 3%. a. If r = 2, what is i? b. If the Fed reduces the money growth rate by 2% points per year, what ...

### Exam set 1 amp 2set-11 which of the following statements is

Exam SET 1 & 2 SET-1 1. Which of the following statements is true about a downward-sloping demand curve that is a straight line? The slope and the elasticity are the same at all points. The slope remains the same, but el ...

### Asignment 11 given the production function asy 68 135x1

Assignment 1 1. Given the production function as: y = 6.8 + 1.35x 1 + 7.7x 2 - 8.5x 3 + 0.4x 4 - 0.06x 1 2 - 1.25x 2 2 + 0.2x 1 x 2 and assuming x 3 = 0.32 and x 4 = 4.25 i. Form production function in iso-quant set. ii. ...

### Question 1consider the market for a course of antibiotics

Question 1. Consider the market for a course of antibiotics. Suppose the supply of antibiotics follows P = 5 + 2Qs and the demand follows P = 20 - 2Q D . Here, Q represents antibiotics, denominated in millions of units. ...

### Assignment voluntourism-go to httpwwwvoluntourismorgreview

Assignment: VolunTourism- Go to http://www.voluntourism.org Review the home page to understand the resources available on this web site and to get a feeling for what VolunTourism is.On the menu (left screen) under "Who A ...

### Assignment production cost analysis and estimation applied

Assignment: Production Cost Analysis and Estimation Applied Problems Please complete the following two applied problems: Problem 1: William is the owner of a small pizza shop and is thinking of increasing products and lo ...

### 1 a explain in clear language the economic inefficiency

1. a) Explain in clear language the economic inefficiency associated with adverse selection. b) The ACA (aka Obamacare) included an insurance mandate, which forces everyone to purchase insurance or face a penalty. Under ...

### Assignment 1 -i watch the videos on demand and supplythere

Assignment 1 - I) Watch the videos on Demand and Supply There are 5 changes in Demand that shift the demand curve to the right or left.  They are Change in Tastes and Preferences Change in Income Change in Population Cha ...

### Econ discussionwith everything discussed with this course

Econ discussion With everything discussed with this course, first watch How we can make the world a better place by 2030. Then, offer your considerations as to whether this could work or not. Within your response, provid ...

• 13,132 Experts

## 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.

### 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