ule_mt2_v1_soln

# Makes parking easier by locating open spots

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Unformatted text preview: and, the wage will unambiguously rise. 5 End Section 2 Section 3: Short Answers 1) (11 points total) a) 7 points Consider the case of two cities, Victoria and Vancouver. Utility per worker curves are given for each city in the diagram below, as are current (mythical) populations. 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 6 other places to live in the region, and that migration can only occur between the two cities (people cannot leave or join the region). Victoria starts at i. Vancouver starts at k. When the policy change is implemented Vancouver jumps to point l overnight. At this point with Victoria at i and Vancouver at l, Vancouver is a more appealing place to live than Victoria. So people migrate out of Victoria and into Vancouver. Note that the distance representing outmigration from Victoria should match the distance representing inmigration to Vancouver. b) 4 points Is Victoria better off, worse off, or unaffected by the policy change in Vancouver? Briefly explain why. Victoria is better off. This is because when people move out it becomes less congested and polluted, and those gains offset any loss of agglomeration externalities from the 7 smaller population (because we’re on the downward sloping side of the utility per worker curve). 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. Agricultural subsidies raise t...
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## This note was uploaded on 09/26/2013 for the course MATH 102 taught by Professor Maryamnamazi during the Spring '10 term at University of Victoria.

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