1. Consider a heterogeneous labor economy with a population Luniformly distributed on the continuum [100, 120]. There are two cities, which we term 0 and 1. Assume that cityO is the low skill city, populated by skill types [100, z] and city 1 is populated by high skill types [ž, 120] , where žis a boundary skill type that receives equal utility in either city. Let ze denote the simple average of the skill typespresent in city c. Let the output of skill type z in city c be given as Ycz = zgiven as rc =100. The raw productivity z of individuals is(ž,Le)0.051. Let the rent in city c be45LA. How do we define spatial equilibrium in this problem?B. In equilibrium, what proportion of the total population is in cities 0 and 1 respectively?C. Is the more skilled city also larger?D. Show that for type z > ž that their net income is higher in city 1 than city 0 and vice versa for z < ž.E. What is the median output in each city?0.135Utility is output net of rent, so for person z in city c is Ucz= Ycz - rc.

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Answered: 1. Consider a heterogeneous labor…

Linear Algebra: A Modern Introduction

4th Edition

ISBN:9781285463247

Author:David Poole

Publisher:David Poole

Chapter2: Systems Of Linear Equations

Section2.4: Applications

Problem 1EQ: 1. Suppose that, in Example 2.27, 400 units of food A, 600 units of B, and 600 units of C are placed...

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