Part 1 True, False, or Uncertain; Explain (5 points each) For each question, answer whether the statement is true, false, or uncertain and **concisely** explain why. Credit is given for the reasoning, not just the correct answer. 1. Rent stabilization does not create rationing because that would be associated with quantity controls, not price controls. 2. Glaeser's explanation for the rise of New York City is a strong endorsement of the New Economic Geography's perspective that historical accidents are key in determining which cities grow to be large. 3. Manhattan has a larger fraction of apartments that are studio apartments than Brooklyn does because, a few patches of wealth notwithstanding, the median income in Manhattan is lower than Brooklyn. 4. Los Angeles is both more productive than Houston and has a nicer climate (we assume). This means rents will be higher in Los Angeles, but wages could be lower or higher. 5. In the Lin Tian/Adam Smith model of the division of labor, more complex firms have a greater division of labor both because they benefit from a greater division of labor anywhere and because they tend to locate in large cities where a greater division of labor is less costly to implement. 6. The decline of manufacturing in New York City is evidence that knowledge exchange is less important to city formation than it was 50 years ago. 7. There are two types of theories of city formation, those that are based on agglomeration forces and those that are based on congestion forces. 8. The Arzhagi and Henderson model showed how to value knowledge spillovers using data on the number of entrepreneurs near Madison Avenue. 9. Leah Boustan provided an important counterargument to the traditional description of white flight to the suburbs, showing that blacks were drawn into the large Northern cities by the departure of whites and not the other way around. 10. The Schelling Model shows that racial segregation tends to be more stable than integration. 11. The fact that measured wage inequality (e.g. Gini coefficients) is higher in large cities than small shows that the poor would be better off if they moved to smaller cities. 12. In the New Economic Geography, inequality across locations is lowest when transport costs are high and inequality may well rise when transport costs get sufficiently low (but positive). 13. In the paper on consumption segregation using Yelp data, the largest factor causing consumption segregation is that people live in segregated neighborhoods, and so the (time and other) costs of getting around the city imply that consumption segregation will be quite similar to residential segregation. 14. The fact that in Manhattan the median price of rent stabilized studios is $1,300 and that of rent stabilized apartments with three or more bedrooms is $1,250 suggests that the demand for studios there is very intense. 15. If a new, noisy, smelly garbage transfer station is located in a neighborhood, then the impact will be the same on the initial residents of both market rate rentals and rent-stabilized apartments. 16. The fact that it is the presence of positive externalities, such as knowledge exchange, that explains why cities exist at all, also suggests that cities will be too small from a welfare perspective in our standard models. 17. Those is the city who don't have rent stabilized apartments face higher market rate rents. One reason for this could be that developers of new rental housing may worry that the new units will eventually be brought within the stabilization system and so the developers require a risk premium to bring rental units to market. 18. Bicycles can equally take people who live at the edge of Manhattan into the center and allow those who live at the center to visit the edge. This suggests that the introduction of the Citi Bike bikeshare system may raise the overall number of trips to restaurants and bars in both the center and edges, it won't have a biased impact, favoring visits to one over the other. 19. If something like the Google self-driving car comes into common use, it will drive up suburban home prices relative to apartment prices in Manhattan because it will dramatically reduce the cost (including the disutility from driving) of the commute. 20. Transportation is becoming increasingly important in our mobile society, as is evident in its rising share in GDP