There are two cities located in Canada. One is called Vancouver and the other is Toronto. Assume workers and firms can migrate for a cost of zero between the two cities. Suppose that Vancouver elects an environmentalist as Mayor and the mayor increases local pollution taxes. Predict how the composition of polluting industries will change in each of the two cities following the policy change. Use housing demand and supply graphs in the two cities to predict how real estate prices in the two cities will be affected following the policy change.

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