ECON 576 study questions

For full credit on an exam, each answer should include these four parts:

(1)summarize your answer in full, grammatically correct sentences (Suggestion:do this LAST)

(2)Define all esoteric terms needed in your answer. Sketch the analytical proof of your claim/answer.

(3)Properly cite the papers you rely upon: for example, “Syverson, (2004) argued that...”

(4)Describe/report the empirical evidence supporting your claim/answer, and cite the papers, for example, “Henderson, et. al (1995) estimated the contribution of ....”

S1. Why is economic activity concentrated in cities and especially at river, lake, and ocean port cities? Why don’t firms spread out to rural locations where both land and labor are cheaper?

S2. Consider two places. In one place, consumers prefer variety, and they notice qualitative differences between the products produced by different firms. In the other place, consumers care only about quantity, and they notice no difference between firms’ outputs. In which place will (i) mark-ups be higher? (ii) firms be larger? (iii) consumer utility higher?

S3. How can it be that average wages are low in Los Angeles, where land and housing prices are very high?

S4. (a) What theories are being tested,

(b) what are the three null hypotheses,

(c) what equation is estimated,

(d) what data sources are used,

(e) and how should the information in Table 1 (below) be interpreted?

S5. Why is productivity lower in less densely populated places?

S6. Why, if Iowa wages are above average and Iowa unemployment rates are so low, might young people be migrating out of Iowa? Iowa’s labor force is already fully employed: Iowa unemployment rates are less than 3%, compared to 5% nationally. Also, Iowa is one of the least densely populated states in the USA. Half the citizens of Iowa reside in towns of population less than 2,000 persons. Wages in Iowa are at the national average, but housing, commercial, and industrial land costs are significantly lower. There is a persistent net out-migration from Iowa.

  1. What kinds of amenities, in general, does Iowa appear to have? Desired, irrelevant or disliked by people; and productive, irrelevant, or costly for businesses? That is, what explains Iowa’s wages and rents relative to the national average ?
  2. Why do young people migrate?
  3. How do firms choose the locations of their establishments (what are the relevant constraints)?
  4. What economic advantages of spatial concentration are likely to be lacking in Iowa?
  5. Which industries appear to benefit most from urbanization?