3. (30 pts) A city is being restructured where factor substitution is not allowed (Urban planners dictate single-story b

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3 30 Pts A City Is Being Restructured Where Factor Substitution Is Not Allowed Urban Planners Dictate Single Story B 1 (44.07 KiB) Viewed 31 times

3. (30 pts) A city is being restructured where factor substitution is not allowed (Urban planners dictate single-story buildings for all), and there are three types of businesses that are interested in bidding for land: service sector firms (S), manufacturers (M) and farmers (F). There is a circumferential highway that is located just 2 miles outside the city center. Monthly expected revenues are $1000 for S. $350 for M and $100 for F. Non-land related costs are $350, $50 and $40 for S, M and F, respectively. Monthly mortgage payment for the building costs are $200 for S, $50 for M and $10 for F. Transportation costs for the service sector are given by Ts(x) =18x? where x is the distance from the city center. For manufacturer firms it is Tm(x)=25x, and for farmers it is T-(x)=2x, where x is the distance of the land to the highway, a. Derive the willingness to pay function for each sector and draw the corresponding bid-rent curves on the same graph, carefully locating all the intersection points, locating the city center at the origin and marking the location of the highway very carefully on your horizontal axis. b. Draw (highlight) the equilibrium city-wide bid rent curve on your graph. c. Indicate, on a 2-dimensional circular area map of the city, the equilibrium location of each sector in the city