Annual transport costs are equal to $2.40 per (round-trip) mile each day, times five days per week and 50 weeks per year.

Based on the table below, find the distance from the CBD that a consumer would choose to live at in order to maximize their utility.

For simplicity, consider the marginal cost and marginal benefit of moving from a location of 1 mile from the CBD to 2 miles from the CBD to be the marginal cost and benefit AT 2 miles from the CBD, similarly for 2 to 3 miles, 3 to 4 miles and so on. (This is because the question does not require calculus and we want to keep it simple).

p is the price per square foot of housing for a one year rental. q is housing in square feet.

  

Transcribed Image Text:

Miles from CBD 1 2 3 4 5 6 7 8 9 10 11 12 q р 1100 13 1200 9 1300 6 1400 4 1500 2.8 1600 1.8 1700 1.2 1800 0.8 1900 0.6 2000 0.5 2100 0.45 2200 0.43 Miles from CBD 1 2 3 4 5 6 7 8 9 10 11 12 q р 1100 13 1200 9 1300 6 1400 4 1500 2.8 1600 1.8 1700 1.2 1800 0.8 1900 0.6 2000 0.5 2100 0.45 2200 0.43

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