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Absence of any restriction by landowners

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Suppose that landowners have the power to restrict x¯, the distance to the edge of the city, in order to increase the land rent they earn. Suppose that, with no restriction, the urban land rent function is given be r = 100 - x, where x is distance in blocks to the CBD. Suppose that agricultural land rent rA is equal to 20.

a.) Compute x¯ in the absence of any restriction by landowners, and illustrate your result in a diagram. Now suppose that the landowners restrict x¯ to a value of 65 blocks, the urban land rent curve shifts up and the new rent function is r = 105 - x.

Reference no: EM131224716

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