ECON 3500 Lecture 7: UrbEc 7e Ch7 MA
12 Apr 2018
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Each innovation decreases commuting cost per mile, flattening the housing-price curve: over time, the feasible radius of the city [increased, decreased] because commuting cost per mile decreased, manufacturing: labor vs. freight cost. Total cost is minimized at the [city center, suburb]: suppose the intracity truck is introduced, decreasing the daily freight cost. The firm will be indifferent between the city center and the suburb if the daily freight cost is per mile. Total cost is minimized at the [city center, suburb], with a cost of , computed as. savings in exchange cost exceeds the premium for labor: the firm will be willing to pay more for a site in the [city center, suburb] because the. savings in exchange cost is less than the premium for labor: the firm will be willing to pay more for a site in the [city center, suburb] because the.
