ECO333H1 Lecture Notes - Lecture 5: Marginal Cost, Opportunity Cost, Toronto Transit Commission Fares
Document Summary
As more firms cluster, more competition for resources so higher prices for those resources. Commuting is difficult (as cities get bigger, more congestion) You do(cid:374)"t li(cid:448)e i(cid:374) (cid:272)ities (cid:449)he(cid:374) the (cid:374)egati(cid:448)e e(cid:454)ter(cid:374)alities of doi(cid:374)g so out(cid:449)eighs the positi(cid:448)e externalities. From the above diagram we can see that cities should never be too small because people would simply move to a bigger one to increase their utility level. Say you live in toronto and get a job in montreal (both are currently the same size). When you move to your new job, toronto gets small and montreal gets bigger. Now toronto offers you a higher utility level than montreal so you move back. The utility curve may shift due to policy changes. Practical problem of limiting the population size: equity problem (wealthy people could pay their way to a residence permit) Geography: affecting potential population size, climate. If every export job leads to of the lo(cid:272)al jo(cid:271)s .
