Question 1 - New York city recently introduced a bike-share program. One advantage of this program is that it allows residents to more easily reach areas in the downtown that are further from the nearest subway station. We will analyze this in the context of the monocentric city model. (1a) In the model, how would we expect this to affect housing prices and population density in these areas of the downtown core which were previously more difcult to reach? (1b) In the model, if you were a renter in one of these areas prior to the change, would your utility go up or down as a result of the new program? Ignore for now the cost of the program. (1c) Suppose that the program is funded by a tax on all residents of the city. In the model, if you are a resident of one of the areas of the city NOT served by the new bikeshare system, but you still have to pay the tax to fund it, would your utility (1) go down, (2) go up, or (3) we cannot tell? Why? Question 2 - Consider the RosenRoback framework that we used to think about producer and consumer amenities, where workers must be indifferent between staying in a city and their outside option (V (r, w, a\") = Vac) and rms are competitive (C(r, w, a?) = 1). Suppose that Sacramento is an average productivity city while Los Angeles is a high productivity city. The two cities have the same level of consumer amenities. (2a) Describe graphically the equilibrium rent and wage levels in these two cities as- suming that there are no federal or state taxes affecting the system (put w on the xaxis). (2b) Now suppose that there are lumpsum federal taxes, so everyone pays some xed amount T (ignore the distribution of federal government expenditures). How would the graphs above change? Assume that the rent and wage levels in Sacramento are unchanged. (2c) Now suppose that instead of a lumpsum tax, there is a federal income tax, where residents pay a xed percentage of their nominal wage in taxes (ignore the distribution of federal government expenditures). Describe graphically how this changes your graph. (2d) Now suppose that in addition to the federal income tax, there is a mortgage interest deduction that is increasing in the price of housing, and assume that all residents are homeowners (ignore the distribution of federal government expenditures). How would this change things relative to the graphs you drew for part a and part c (show graphically). Would to mortgage interest deduction increase or decrease the effect of the income tax on the system of cities