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Problem_Set_2-Answers - Department of City Regional...

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Department of City & Regional Planning CP 113A - Fall 2006 U niversity of California at Berkeley Mark Wolfe PROBLEM SET #2 **ANSWERS** 1. Assume the following statements are true. For each, identify the economic concept or principle that best explains why it occurred, and explain in a few short sentences. If you think there are more than one, say so and explain why. 2 points each, 10 total a. Film studios and film-production support firms cluster in Southern California in the 1910s and 1920s. Drawn by ability to film 300 days per year and cheap land; then localization economies: economies of scale from shared input suppliers; knowledge spillovers; labor market economies. b. Federal Express locates its hub in Memphis. Principle of median location, driven by drive to keep jet fuel costs low. c. Twenty art galleries choose to locate in a single building near Union Square in San Francisco. Shopping externalities/comparison shopping for substitute goods d. Intel, the chipmaker, has its headquarters in Santa Clara, California, but opens a chip fabricating plant in Israel. Spatial division of labor and/or profit-cycle. Separation of front-office/R&D from manufacturing. e. See’s Candies, a confectioner, locates its candy-making factory (using assembly-line technology) in South San Francisco, where labor costs are high relative to more suburban and ex-urban locations. Candy has high monetary weight b/c perishable; See’s is “weight-gaining” firm that locates near market or transport hub b/c transp. costs are bigger factor than labor costs (don’t need a PhD to work at the See’s factory). 2. Consider two adjacent countries, Northland and Southeria. Southeria has a large 1
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2 supply of workers and a low market wage, but is arid and without substantial forest resources.
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Problem_Set_2-Answers - Department of City Regional...

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