Urban Economics Assignment 1
Urban Economics Assignment 1
Student Name: HAO LI
Student Number: 997456097
Chapter 2
1. a) The gains from trade are +1 shirts for North and +1 shirts for South.
b) A trading city won’t develop because the opportunity cost of exchange for
North is 2 shirts, which exceeds the gross gain of 1 shirt.
c) Suppose an innovation in transportation decrease the transaction time. A trading city will develop if the transaction time is less than 15 minutes because the opportunity cost of exchange is 1 shirt for the North and 1/4 shirt for South.
2. a) The labor used in transporting products from production sites to trading firms will decrease because the transmitter, with 0 MC, replaces with the wagons.
b) The volume of trade in the region will increase because the transmitter decreases the unit transport cost to 0, allowing the full exploitation of differences in comparative advantage that generate comparative advantage and trade.
c) The labor used in processing transactions will increase because the volume of trade increases.
d) The trading city will grow if the gains in the labor used in processing transactions exceed the losses in labor used in transportation.
e) Suppose the transmitter technology changes, and it becomes economical for an individual household. The trading city will disappear because the absence of scale economies in exchange means that individual households will engage in direct trade. 5
a) An innovation in production that doubles labor productivity in factories will shorten the stem of the martini glass from 4/12 loaves to 2/12 loaves because cost per shirt = the labor cost per hour / the output per hour.
b) The width of the market area increases from 16 miles to 20 miles because
2/12+10/12=12/12.
c) An innovation in transportation that doubles consumer travel speeds will decrease the slope of the martini glass 1/12 loaf per mile to 1/24 loaf per mile.
d) The width of the market area increases from 20 miles to 40miles because
2/12+20/24=1.
7
a) The
Student Name: HAO LI
Student Number: 997456097
Chapter 2
1. a) The gains from trade are +1 shirts for North and +1 shirts for South.
b) A trading city won’t develop because the opportunity cost of exchange for
North is 2 shirts, which exceeds the gross gain of 1 shirt.
c) Suppose an innovation in transportation decrease the transaction time. A trading city will develop if the transaction time is less than 15 minutes because the opportunity cost of exchange is 1 shirt for the North and 1/4 shirt for South.
2. a) The labor used in transporting products from production sites to trading firms will decrease because the transmitter, with 0 MC, replaces with the wagons.
b) The volume of trade in the region will increase because the transmitter decreases the unit transport cost to 0, allowing the full exploitation of differences in comparative advantage that generate comparative advantage and trade.
c) The labor used in processing transactions will increase because the volume of trade increases.
d) The trading city will grow if the gains in the labor used in processing transactions exceed the losses in labor used in transportation.
e) Suppose the transmitter technology changes, and it becomes economical for an individual household. The trading city will disappear because the absence of scale economies in exchange means that individual households will engage in direct trade. 5
a) An innovation in production that doubles labor productivity in factories will shorten the stem of the martini glass from 4/12 loaves to 2/12 loaves because cost per shirt = the labor cost per hour / the output per hour.
b) The width of the market area increases from 16 miles to 20 miles because
2/12+10/12=12/12.
c) An innovation in transportation that doubles consumer travel speeds will decrease the slope of the martini glass 1/12 loaf per mile to 1/24 loaf per mile.
d) The width of the market area increases from 20 miles to 40miles because
2/12+20/24=1.
7
a) The