3. There are two industries in a circular city. Each industry produces a good for export and theexport point is the center of the city. The price at the point of export is $15 per unit for thefirst good and $15 per unit for the second good. Transportation costs within the city are 50cents per mile per unit for the first good, and 75 cents per mile per unit for the secondgood. Other costs (labor and capital) are $8 per unit for the first good and $6 per unit forthe second good. Firms produce 60 units of the first good and 80 units of the second goodper unit of land. The land market is perfectly competitive, which implies that the users ofland bid enough to reduce their economic profits to zero. The agricultural bid rent is $30 atall locations.a. Find the bid rent curves for the two industries that correspond to zero economic profits.b. Where do the first and second industries locate in the city? Show on a graph.

Rent is characterized as a surplus that comes from benefits like capitalization. It is an indicator…

Answered: a. Find the bid rent curves for the two…

a. Find the bid rent curves for the two industries that correspond to zero economic profits. b. Where do the first and second industries locate in the city? Show on a graph.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3. There are two industries in a circular city. Each industry produces a good for export and the
export point is the center of the city. The price at the point of export is $15 per unit for the
first good and $15 per unit for the second good. Transportation costs within the city are 50
cents per mile per unit for the first good, and 75 cents per mile per unit for the second
good. Other costs (labor and capital) are $8 per unit for the first good and $6 per unit for
the second good. Firms produce 60 units of the first good and 80 units of the second good
per unit of land. The land market is perfectly competitive, which implies that the users of
land bid enough to reduce their economic profits to zero. The agricultural bid rent is $30 at
all locations.
a. Find the bid rent curves for the two industries that correspond to zero economic profits.
b. Where do the first and second industries locate in the city? Show on a graph.

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