The city of Hampton is inhabited by identical competitive firms. Each firm produces 20 units of...

 

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The city of Hampton is inhabited by identical competitive firms. Each firm produces 20 units of output using two units of capital and one unit of land. The price (revenue per unit) of output equals $2 per unit; the price of capital also equals $2 per unit. Firms ship all of their output to the city centre at a cost of $0.50 per unit of output per kilometre. In addition, the firms create a noxious odour that keeps residents awake at night. The marginal external cost of this olfactory pollution is $0.50 per unit of output. The bid rent for residential land is $26.00 per unit. Find the equilibrium or private industrial bid rent function for land. (Profit is equal to revenue minus capital costs, transportation costs, and rent, and competition implies that profit must equal zero.) (1) R(d)-26-d (2) R(d)-36-10d (3) R(d) 44-10d (4) R(d) 40-100d What is the socially optimal point of efficient industrial bid rent function for land? (Hint: To derive the socially optimal or efficient bid rent function, you must force the firms to take the cost of the pollution that they create into account.) (1) R(d)-46-20d (2) R(d)-36-20d (3) R(d)-36-10d (4) R(d)-26-10d The city of Hampton is inhabited by identical competitive firms. Each firm produces 20 units of output using two units of capital and one unit of land. The price (revenue per unit) of output equals $2 per unit; the price of capital also equals $2 per unit. Firms ship all of their output to the city centre at a cost of $0.50 per unit of output per kilometre. In addition, the firms create a noxious odour that keeps residents awake at night. The marginal external cost of this olfactory pollution is $0.50 per unit of output. The bid rent for residential land is $26.00 per unit. Find the equilibrium or private industrial bid rent function for land. (Profit is equal to revenue minus capital costs, transportation costs, and rent, and competition implies that profit must equal zero.) (1) R(d)-26-d (2) R(d)-36-10d (3) R(d) 44-10d (4) R(d) 40-100d What is the socially optimal point of efficient industrial bid rent function for land? (Hint: To derive the socially optimal or efficient bid rent function, you must force the firms to take the cost of the pollution that they create into account.) (1) R(d)-46-20d (2) R(d)-36-20d (3) R(d)-36-10d (4) R(d)-26-10d

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2 a The answer is 1 Rd 26 d This is because the private industrial bid rent functio... View the full answer