An industry is subject to agglomeration economies (and diseconomies). The profit per firm is 150 for an isolated firm, and increases to a maximum of 210 per firm in a cluster with 5 firms. The profit curve is linear, with a slope of +15 in the positively- sloped part and -10 in the negatively-sloped part.

1. a) Draw a diagram to illustrate this profit curve.
2. (3 marks)
3. b) What will be the equilibrium number of firms in the cluster and how much profit will each firm make? Will this be greater than the efficient number of firms? Explain your answer.
4. (6 marks)
5. c) Explain how falling transport costs as a result of technological change (the 'death of distance') might affectthe profit curve illustrated in a). Will this decrease in costs necessarily reduce the need for cities? (11 marks)