Consider an industry in a circular city. The industry produces a good for export, and the export point is the center of the city. The price of the good at the point of export is $10 per unit. Transportation costs within the city are 25 cents per mile per unit of the good, and other costs (labor and capital) are $5 per unit. Firms in the industry produce 100 units of the good per acre of land. The land market is perfectly competitive, which implies that the users of land bid enough to reduce their economic (excess) profits to zero.

a. Find the bid-rent function for the industry that corresponds to zero economic profits.

b. Assume that agricultural bid rent is $100 per acre at all locations. At what distance does agricultural bid rent equal the industry’s bid rent?