Question 2 - Urban Growth Boundary and Externalities In the city of Euphonia, households have to commute to the city center to work. In addition, the more households in the city, the greater the level of noise pollution. Household utility is given by U = 25 N d R 0 N is the noise level, which is currently at 10. 0 d is the distance to the city center. 0 R is the rent paid by the household. If households move out of the city and live in the countryside, their utility is U0 2 0. [a] Draw the bidrent curve of households bh, for 3: going from 0 to 20. The other use of land in Euphonia is for farms. The bid rent of farmers is bf : 3. Farmers are unaffected by noise pollution. (b) Where are the city limits of Euphonia? This is where houses end and farmland begins. The city government now sets an urban growth boundary at :1: = 10. Land farther out from this boundary is legally prohibited from being used for housing. This reduces the number of houses, so the level of noise pollution falls to 8. (c) Draw a bid-rent diagram with x-axis going from 0 to 20. Show the following information: o The bid rent of farmers bf 0 The bid rent of households, before the urban growth boundary 3);, o The bid rent of households, after the urban growth boundary is introduced bi, (d) Which landlords suffer a decrease in land value due to the urban growth boundary? (e) On the same bid-rent diagram, shade the area representing the overall loss in land value from part d). Calculate a numerical answer for this loss