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

Assignment questionsque1 why validation of the software

Assignment Questions: Que.1 Why validation of the software requirement is necessary? List some conditions that should be checked in the validation phase of software requirement. Que.2 Six Sigma is used to reduce the defe ...

Assignmentwe often have difficulty understanding how our

Assignment We often have difficulty understanding how our own customs and traditions could be viewed any way other than as right. In that regard, cultural relativism (viewing a custom from the other culture's perspective ...

Assignment multiyear plans and Assignment: Multiyear Plans and Analysis Preparation •

Assignment: Multiyear Plans and Analysis Preparation • Review the document titled "City of Charlottesville 2010 Annual Comprehensive Plan" located in the course shell. Write a three to four (3-4) page paper in which you: ...

Assignmentin this assignment you must break a norm this

Assignment In this assignment, you must break a norm. This breach must be done in a public forum. You will be writing an essay about your experiment, in which you must be sure to answer all of the questions listed in thi ...

Assignment land restoration proposalpart 1please see

Assignment: Land Restoration Proposal Part 1 Please see attachment for part 1 and only complete highlighted section for this assignment. Your team has been given the land rights to a 100-acre abandoned parcel of land. Th ...

Assignmentyou have been asked to assist your organizations

Assignment You have been asked to assist your organization's marketing department to better understand how consumers make economic decisions. Write a 1,050-word analysis that includes the following: • The impact the theo ...

Economics problemsconsumer demand analysis and estimation

Economics Problems Consumer Demand Analysis and Estimation Applied Problems Please complete the following two applied problems: Problem 1: Patricia is researching venues for a restaurant business. She is evaluating three ...

Assignment1in your own words please define describe and use

Assignment 1. IN YOUR OWN WORDS, please define, describe and use an example for the following term (see below). The term (including example) should be no more than 50 words.The following rubric is used to assess each ter ...

Assignment discussion-applying balanced scorecardin many

Assignment: Discussion-Applying Balanced Scorecard In many cases, managers end up in trouble as they direct their focus exclusively on cost savings. Cost cutting is always emphasized, but other impacts, such as decreased ...

Assignmentvirtually all general managers face

Assignment Virtually all general managers face capital-budgeting decisions in the course of their careers. The most common of these is the simple "yes" versus "no" choice about a capital investment. Regardless of the typ ...

  • 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