Of transport of goods in the us prior

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Unformatted text preview: for each city in the diagram below, as are current (mythical) populations. 6 Suppose that the city of Vancouver pursues an innovative traffic management program that leads to shorter commutes which increases the quality of life for its residents. Using the diagram below, clearly illustrate the shift in equilibrium populations in each city that results from the policy change. Clearly denote the pattern of migration that will occur between the two cities. Clearly label the new equilibrium population in each city and the new equilibrium utility per worker. Assume that there are no other places to live in the region, and that migration can only occur between the two cities (people cannot leave or join the region). b) 4 points Is Victoria better off, worse off, or unaffected by the policy change in Vancouver? Briefly explain why. 7 2) (6 points total) Suppose that office, manufacturing, and residential users in a city prefer, ceteris paribus, to be closer to the center of the city. Agricultural users have a constant bid- rent that is the same at all distances from the center of the city. a) 3 points Using a diagram that shows just a residential bid- rent function and an agricultural bid rent function, clearly illustrate how agricultural subsidies lead to more compact cities. b) 3 points Using a diagram that shows just a residential bid- rent function and an agricultural bid- rent function, clearly illustrate how a federal gas tax would lead to more compact cities. Assume the gas tax is not refunded to local residents. 8 3) (3 points) Suppose that the federal government announces a policy that it will tax the owner of every parcel of land in Victoria $100 a year (regardless of size or value) once a year every year into the infinite future, starting today. Assume the federal government does nothing useful to Victoria landowners with this money (assume the feds hold a big bonfire and burn the money). How much will each parcel of land in Victoria change in value assuming an interest rate of 10%, fixed into the infinite future? Assume that people are not permitted to combine parcels to avoid the tax. You must show your work to receive credit. End Section 3 End of Exam 9 This Page Left Intentionally Blank (for scratch work) 10...
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