Suppose that a household resides in an urban area at a distance of 8 miles from downtown. The household occupies a residential lot measuring 5000 square feet, and at this distance from downtown land rent is $2.00 per square foot per year. One of the members of the household must commute to downtown for work five days a week (50 weeks per year) The total cost of this commuting (counting time costs as well as monetary costs) is $6.00 for each work day. a. How much is the household currently paying in land rent per y ear?
b. How much is the household currently paying in commuting costs per year? Show your work.
c. Assume that the per mile cost of commuting is everywhere the same (i. e., it's the same cost to travel a mile either near downtown or on the outskirts of town). How much would the household's annual commuting costs be if they lived 6 miles from downtown or 10 miles from downtown? Show your work
d. Assume that land rent is $2.20 per square foot 6 miles from downtown and $1.80 per square foot 10 miles from wwwntown. If the household rented a lot of exactly the same size as they currently do, how much would their land rent be per year if they lived 6 miles from downtown or 10 miles from downtown? Show your work.
e. Assuming that land rent and commuting costs are the only factors being considered by this household, is living 8 miles from downtown a locational equilibrium for this household? Why or why not? If not, should they move closer to or farther from downtown?