Question
Hi, I'm not quite sure on how to work on this question, can someone please help explain? Thank you. There are three bidders in town,
Hi, I'm not quite sure on how to work on this question, can someone please help explain? Thank you.
There are three bidders in town, office firms, office workers, and agricultural firms. Their respective bid rent functions are given by:
Office firm Ro=200-5x,
office workers Rw=180-x, and
agricultural firms Ra=164.
where R denotes the bid rent and x the distance from the city center.
a) Where does each bidder locate? (calculate the respective distances from the city center)
b) Now assume that the city imposes a fuel tax on offices and on office workers resulting in an increase in their corresponding marginal transportation cost by 1. How does this change your answer to (a)?
c) Now assume that the entire revenue from the fuel tax is paid to office workers (not to offices). The government sends out checks resulting in an income growth of $2 for each worker. How does this change the respective locations.
d) Now assume that, in addition to all effects mentioned under (b) and (c ), climate change reduces profits (and bid rents) of agricultural firms by 4. How does this change the respective locations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started