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urban economics




Question;Assignment1. Consider;a city that must decide how many libraries to provide. The city assumes the;travel cost is 10 cents per library trip per mile. The table below lists the;average production costs (APC) and average distances (AD) to library patrons;for different numbers of libraries.;Number of Libraries;APC ($);AD (mile);Travel Cost;Average Total Cost;1;0.30;20;3;0.40;10;5;0.50;7;9;0.90;4;11;1.20;2;(a) If;the city?s objective is to minimize the average total cost of a library trip;and the city must choose from the options listed in the table, how many;libraries should it provide? (complete the table)(b) If;the unit travel cost doubles, how many libraries should the city provide?1.;The table below summarizes the productivity of workers;in wheat and cloth production in two parts of a region.;Output;per Hour;Opportunity;Cost;East;West;East;West;Wheat (bushel);1;4;Cloth;4;6;(c) Complete;the table by providing the opportunity costs of producing wheat and cloth in;the East and the West. For which good does the East have a comparative;advantage and absolute advantage? What about the West?(d) Assume;that transport costs are zero and that the exchange rate is six clothes for;three bushels of wheat. Assume that:? a;western household switches one hour from cloth production to wheat production,? a;eastern household switches three hours from wheat production to cloth;production and exchanges half of its cloth production,will the;households be better off?(e) Suppose;that the time required to execute the trade in (b) is thirty minutes. Is trade;still beneficial? At what transaction cost (time per trade) would the net gain;from trade be zero for the western household?2.;We consider a Shopping model. Consumers pay;store price plus all transportation costs (Free On Board Pricing). One way to;determine the distance that consumers are prepared to travel to shop is to;examine transportation costs in light of the demand curve. The equation for the;demand function in Q= 10? 2P, where Qis the quantity demanded and P;the price.(a) Calculate;the equation of the inverse demand function (the Price is function of the;Quantity) and evaluate the limit price (maximum price that consumers are;willing and able to pay).(b) If;the store price is $4 and transport costs are $1 per mile, what is the equation;for the Price-Distance function? Find the radius of the market area. (Hint: Set;the price-distance function equal the limit price of the demand function and;solve for D.)(c) Calculate;the market area radius if one constructs a more efficient road system that cut;downs the time needed to drive to the store and the transportation per mile is;now equal to $0.5.;3.;Consider a region where two firms are producing;the same good at a different price. The first firm is located on the coastline;whereas the second firm is located five miles inland. Using the information;provided by the excel file (HW1.xls) complete the table on the Excel;spreadsheet. Graph the 3 cost curves associated to: (1) the production of the;good at home, (2) the purchase of this good from Firm1 and (3) the purchase of;this good from Firm2 (X-axis is the distance from the coastline and Y-axis the;Cost). What are the market areas for both firms?


Paper#56470 | Written in 18-Jul-2015

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