3. Consider a traditional nineteenth-century monocentric city with a CBD radius of one mile. In 1869,...

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3. Consider a traditional nineteenth-century monocentric city with a CBD radius of one mile. In 1869, buildings at the edge of the CBD are four stories tall. In 1870, all the buildings in the CBD are destroyed by an earthquake, and the mayor of the city announces that the maximum building height in the rebuilt city will be four stories. In addition, business development will be confined to a circle with a one-mile radius, that is, the size of the CBD is fixed. Suppose that the city is small enough so that events in the city do not affect the equilibrium prices of its export goods (office or manufacturing goods). A. Draw the business bid-rent function before the earthquake and label it R. Draw the business bid-rent function after the earthquake (with the height restrictions) and label it R*. B. Explain any differences between the two bid-rent functions. C. Relax the assumption of fixed output prices and depict graphically the effects of the height restrictions on the market for the city's export goods. Graph and explain the implications of the change in output prices on (1) the business bid-rent and residential bid-rent functions (ii) on the demand for labor (iii) on the supply of labor (iv) on the equilibrium wage (v) on residential density (vi) on the city radius. 3. Consider a traditional nineteenth-century monocentric city with a CBD radius of one mile. In 1869, buildings at the edge of the CBD are four stories tall. In 1870, all the buildings in the CBD are destroyed by an earthquake, and the mayor of the city announces that the maximum building height in the rebuilt city will be four stories. In addition, business development will be confined to a circle with a one-mile radius, that is, the size of the CBD is fixed. Suppose that the city is small enough so that events in the city do not affect the equilibrium prices of its export goods (office or manufacturing goods). A. Draw the business bid-rent function before the earthquake and label it R. Draw the business bid-rent function after the earthquake (with the height restrictions) and label it R*. B. Explain any differences between the two bid-rent functions. C. Relax the assumption of fixed output prices and depict graphically the effects of the height restrictions on the market for the city's export goods. Graph and explain the implications of the change in output prices on (1) the business bid-rent and residential bid-rent functions (ii) on the demand for labor (iii) on the supply of labor (iv) on the equilibrium wage (v) on residential density (vi) on the city radius.

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Before the earthquake the business bidrent function R would show a gradual decrease in rent prices a... View the full answer