Question: Q1. Consider a standard RssenRDbaek model. Suppose there are two cities, LA and Fresno {FR}, and that LA initially has a larger producer amenity (See

Q1. Consider a standard RssenRDbaek model. Suppose there are two cities,

Q1. Consider a standard RssenRDbaek model. Suppose there are two cities, LA and Fresno {FR}, and that LA initially has a larger producer amenity (See Figure 1 below). Housing Price {Pl cm\"; Pr\" Fll}=1 m We. labor Income M 1. Firms are perfectly competitive in cur model, which implies that they all have the same cost per unit of output. How is it possible for some rms to pay higher wages and still have the same cost per unit of Output? i.c. The unit cost of production of rms both in LA and FR is equal to 1 but wages in LA is more (yLA } 33mg] I pciutsI

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