A company mines 390,000 tons of coal per year in a rural county. The coal is worth $77 per ton. The average price for a 2,000-square-foot house with three bedrooms more than 20 km away from the mining site in this county is $230,000. The average price for a similar, 2,000-square-foot house with three bedrooms within 4 km of the mine is 6 percent lower. Using comparative statics, what is the effect of mining on home prices in this county?

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Comparative statics is a method that economists use to analyze how changes in exogenous variables affect endogenous variables in economic models In th... View the full answer