# Assume there are four people in a city. Person A owns one parking lot worth…

Assume there are four people in a city. Person A owns one parking lot worth \$1,000, person B owns two parking lots worth \$2,000, person C owns a small garden worth \$12,000 and person D owns a cottage worth \$35,000. They want to finance a public children’s zoo, a local public good. The zoo will cost \$10,000 and should be financed by a property tax with equal tax rates per property value. Calculate the tax rate (in %) for the following cases a. all four people live in the city b. there is a city of four A-like people c. there is a city of four B-like people d. there is a city of four C-like people e. there is a city of four D-like people f. there is a city of only one A, one B and one C (D has left)

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Urban Economics Problem Set #6 due Tuesday, May 3, in class (1) Assume there are four people in a city. Person A owns one parking lot worth \$1,000, person B owns two parking lots worth \$2,000, person C owns a small garden worth \$12,000 and person D owns a cottage worth \$35,000. They want to finance a public children’s zoo, a local public good. The zoo will cost \$10,000 and should be financed by a property tax with equal tax rates per property value. Calculate the tax rate (in %) for the following cases a. all four people live in the city b. there is a city of four A-like people c. there is a city of four B-like people d. there is a city of four C-like people e. there is a city of four D-like people f. there is a city of only one A, one B and one C (D has left) (2) This is Ch. 8 #4 in your textbook: Consider a city of 200 people (100 tall and 100 short) and two neighborhoods (100 people in each). People generally prefer to live with short people. To draw the rent-premium curves, put the number of short people in neighborhood A (from 50 to 100) on the horizontal axis. The premium curve of tall people is concave from below (i.e., gets flatter as you move to the right), and in a neighborhood of 100 short people, the premium is \$30. The premium curve for short people is linear, and in a neighborhood of 100 short people, the premium is \$50. The two premium curves intersect at S=70 and premium = \$20. a. Draw the tow premium curves b. Is integration (i.e., 50 short, 50 tall) a stable equilibrium? c. Is a mixed neighborhood a stable equilibrium? d. Is segregation a stable neighborhood? Explain. (3) This is Ch. 8 #10a in your textbook: Consider the following statement from the book’s discussion of the spatial mismatch: “One reason for the relatively low employment rate (for blacks) is that the average commute time of blacks was 26 minutes, compared to 19 minutes for whites.” Use a supply-demand graph for the urban labor market to show the economic logic of this statement. The…

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