Consider a simple, homogeneous monocentric city with a circular shape. If the location rent premium at the center is $6,000 per year per acre, the rent at the edge of the city is $11,000 per year per acre, and the density is 3 persons per acre. Supposing that the annual transportation cost per person per mile of distance from the CBD is $200 (round-trip), and if the population increases by 10% (density and transportation cost do not change), what will be the new rent at the center of the city per year per acre?Group of answer choices$17,600$16,300$18,250$17,300
Question
Consider a simple, homogeneous monocentric city with a circular shape. If the location rent premium at the center is 11,000 per year per acre, and the density is 3 persons per acre. Supposing that the annual transportation cost per person per mile of distance from the CBD is 17,60018,250$17,300
Solution
To solve this problem, we first need to understand the concept of a monocentric city model. In this model, the rent gradient is determined by the balance between the higher cost of transportation as one moves away from the Central Business District (CBD) and the lower cost of land.
Given that the rent at the edge of the city is higher than at the center, it suggests that the transportation cost is less than the difference in rent between the center and the edge of the city.
However, when the population increases by 10%, the demand for land near the CBD will increase, leading to an increase in the rent at the center of the city.
Unfortunately, without more specific information about the size of the city, the distance from the CBD to the edge of the city, or how the rent gradient changes with distance, it's not possible to calculate the exact new rent at the center of the city per year per acre.
The answer choices provided (16,300, 17,300) seem to suggest a specific calculation, but without more information, we can't determine which one is correct.
In conclusion, the new rent at the center of the city per year per acre will be higher than the current $6,000 due to increased demand, but the exact amount can't be determined with the information provided.
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