Consider a region with two export products (gloves and socks) and two local goods (tattoos and manicures). The production of each export good is subject to localization economies, so each city specializes in one export good. According to Mr. Wizard, “If my two assumptions (one for export products and one for local goods) are correct, all the cities in the region will be the same size.” Assume that Mr. Wizard’s logic is correct. List his assumptions and explain why together they imply the region’s cities will be the same size.
Consider a region with two export products (gloves and socks) and two local goods (tattoos and manicures). The production of each export good is subject to localization economies, so each city specializes in one export good. According to Mr. Wizard, “If my two assumptions (one for export products and one for local goods) are correct, all the cities in the region will be the same size.” Assume that Mr. Wizard’s logic is correct. List his assumptions and explain why together they imply the region’s cities will be the same size.
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.6P
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Consider a region with two export products (gloves and socks) and two local goods (tattoos and manicures). The production of each export good is subject to localization economies, so each city specializes in one export good. According to Mr. Wizard, “If my two assumptions (one for export products and one for local goods) are correct, all the cities in the region will be the same size.” Assume that Mr. Wizard’s logic is correct. List his assumptions and explain why together they imply the region’s cities will be the same size.
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