In this problem, we will determine the equilibrium pattern of agricultural land use surrounding a city. Think of the city as being located in the middle of a large featureless plain. The price of wheat at the market at the center of town is $10 a bushel, and it only costs $5 a bushel to grow wheat. However, it costs 10 cents a mile to transport a bushel of wheat to the center of town.
(a) If a farm is located t miles from the center of town, write down a formula for its profit per bushel of wheat transported to market. _________.
(b) Suppose you can grow 1,000 bushels on an acre of land. How much will an acre of land located t miles from the market rent for? _________.
(c) How far away from the market do you have to be for land to be worth zero? _________.