Question 22 (30 marks) Consider the monocentric city of Blackstone. The city is

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Question 22 (30 marks) Consider the monocentric city of Blackstone. The city is a circular area located on a featureless plain. It has a predetermined CBD (a point on the plain), where 200,000 identical households all go to work. Agricultural rent is $1 per m2 everywhere. Each household lives on a plot of land that measures 500"m m2. All households are renters. Each household has a utility function of U (land * food)n. Commuting cost per km roundtrip is equal to $10. Throughout this question, the income of each household remains a constant. Additionally, food price remains at $1. (a) (b) (c) Determine the boundary of the city and illustrate it on a graph. 3 marks) Derive the residential bid rent and illustrate it on a graph. 6 marks) It turns out that the city is not in a long-term equilibrium. It offers a higher utility than other places in the country. It is predicted that 42,000 households will move into the city until the migration flow stops. Derive the residential bid rent under the new population size of 242,000 and illustrate it on a graph. State intuitively how migration affects the existing residents. 6 marks) (e) Residents of Blackstone propose to implement an urban growth boundary at the original boundary calculated in (a). Derive the new residential bid rent after the boundary is in place? Would your answers differ for the short-term and for the long-term? Explain how households in the city are affected by the policy. (8 marks) f) If you are a resident of Blackstone, would you support the growth boundary? Why 4 marks) and why not? ) Suppose that in addition to the plot of land you rent, you OWN a plot of land bordering but outside the urban growth boundary. You use it as your vacation home. Would your answer for () change? Why and why not? (3 marks)

Explanation / Answer

We know that the monocentric model is described as William Alonso, Richard Muth, Edwin mills in 1960. The monocentric model is described as spatial relationship between the variables. Under this model a central Business distric and residential regions. The model is focused on the problem of transportation among the regions.

A)

the rent control is described as below:

B) The utilities of both cities are decreased. That means the distance between the two cities cost are not covered by this policy. So the rent control policy the CBD pays higher land price to the bider. Also the distance from both CBD are increased.

C) It is negative pecuniary externalities

The Externality of the monocentric model is pollution. The pollution is increased because of the absence of the tax policy of the government. The pecuniary is transport cost. The transport cost are increased when rent controls are imposed. This creates externality in the economy.

D)

The spatial equilibrium is the interdependence of various firms. In the above situation where the having of the multiple municipalities in one city is reduced. So we take in to account sigle municipality in one city so this will reduced the externality. In the above policy is exerted to west only.

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