Read about Urban Economics; then, answer the following questions:...
Question
Read about Urban Economics; then, answer the following questions:
2. Explain the concept of comparative advantage and the role it plays in the development of trading cities. List and explain any additional economic conditions necessary for the development of trading cities. Explain what additional conditions are necessary for the development of a factory city.
3. Draw the three graphs associated with a factory town showing the firm's average cost curve, the factory's delivered cost and market area, and the town's residential limits, commuting costs, and housing costs. What happens to the town when transportation cost fall, or the production costs decrease.
4. Given a production function with increasing/decreasing (or increasing, or decreasing, or constant) returns to scale, sketch the associated total, marginal, and average cost curves, being careful to indicate the necessary relationships between the curves.
5. Using graphs, explain the role of firm profits in establishing the long run price and quantities produced by a firm. You should show how short run conditions help to establish this long run equilibrium.
6. Show how two Cournot mineral water producers use their cost and demand curves to determine their output given each others output. Show how this determines their best response curves.5. The graph below shows the size distribution of the largest 26 cities and towns in Delaware. Is this distribution unusual? Explain the economic forces that produce this kind of distribution.
7. Two firms produce a similar product and are located 20 miles apart along a linear market. They have a constant marginal and average variable cost equal to 5 dollars per unit of output. It costs one dollar to transport the product one mile. Consumers are uniformly distributed along the market. Draw a graph of the market and indicate the optimal price for each firm to charge, how much of the market each firm serves, and how much profits each firm receives. Explain how this model generalizes to a circular market with free entry and variable location. What role do profits play in establishing an equilibrium in the generalized model.
2. Explain the concept of comparative advantage and the role it plays in the development of trading cities. List and explain any additional economic conditions necessary for the development of trading cities. Explain what additional conditions are necessary for the development of a factory city.
3. Draw the three graphs associated with a factory town showing the firm's average cost curve, the factory's delivered cost and market area, and the town's residential limits, commuting costs, and housing costs. What happens to the town when transportation cost fall, or the production costs decrease.
4. Given a production function with increasing/decreasing (or increasing, or decreasing, or constant) returns to scale, sketch the associated total, marginal, and average cost curves, being careful to indicate the necessary relationships between the curves.
5. Using graphs, explain the role of firm profits in establishing the long run price and quantities produced by a firm. You should show how short run conditions help to establish this long run equilibrium.
6. Show how two Cournot mineral water producers use their cost and demand curves to determine their output given each others output. Show how this determines their best response curves.5. The graph below shows the size distribution of the largest 26 cities and towns in Delaware. Is this distribution unusual? Explain the economic forces that produce this kind of distribution.
7. Two firms produce a similar product and are located 20 miles apart along a linear market. They have a constant marginal and average variable cost equal to 5 dollars per unit of output. It costs one dollar to transport the product one mile. Consumers are uniformly distributed along the market. Draw a graph of the market and indicate the optimal price for each firm to charge, how much of the market each firm serves, and how much profits each firm receives. Explain how this model generalizes to a circular market with free entry and variable location. What role do profits play in establishing an equilibrium in the generalized model.
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2.
Comparative advantage means that trading cities have a different productive characteristics in producing goods. This may come about in several ways. Some people may have better access to certain natural resources (unequal endowments). Some people may have superior skill in producing certain goods (specialization of labor). Some people may produce more of the good to take advantage of economies of scale that reduce the cost of producing each unit.
The additional two conditions are necessary for the development are:
(1) There must be an agricultural surplus. This means that people engaged in agriculture produce more food than is necessary for their own survival. The surplus is available to feed others who may engage in non-agricultural production.
(2) There must be economies of scales in transport. Agricultural surplus and comparative advantage can produce direct trade between individuals or families, but such trade does not require a city. But when trade specialists can reduce transportation costs by moving things in bulk, it is desirable to have a central location where the producer’s goods can be exchanged and then reshipped to consumers. This central location develops into a trading city because it is a convenient place for trade specialists to reside. The city does not need to engage in its own production, but other services and small-scale production usually develop from the need for security
Comparative advantage means that trading cities have a different productive characteristics in producing goods. This may come about in several ways. Some people may have better access to certain natural resources (unequal endowments). Some people may have superior skill in producing certain goods (specialization of labor). Some people may produce more of the good to take advantage of economies of scale that reduce the cost of producing each unit.
The additional two conditions are necessary for the development are:
(1) There must be an agricultural surplus. This means that people engaged in agriculture produce more food than is necessary for their own survival. The surplus is available to feed others who may engage in non-agricultural production.
(2) There must be economies of scales in transport. Agricultural surplus and comparative advantage can produce direct trade between individuals or families, but such trade does not require a city. But when trade specialists can reduce transportation costs by moving things in bulk, it is desirable to have a central location where the producer’s goods can be exchanged and then reshipped to consumers. This central location develops into a trading city because it is a convenient place for trade specialists to reside. The city does not need to engage in its own production, but other services and small-scale production usually develop from the need for security
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