Name: _______________________________________

Write your name above. Answer all the questions below (there is a choice within question 14), in the space provided. The words "paragraph" and "essay" imply complete sentences; otherwise, phrases, lists, and short answers are sufficient. Your raw score out of 74 will be multiplied by 0.27 to yield your score out of 20 (toward the quarter’s total of 100).

1. [6 points] What are the six flows among producers and consumers (three of which are monetary) that the instructor called "the circular flow of capitalism"?

a.

b.

c.

d.

e.

f.
 
 

2. [3 points] Define "economics" and "political economy," and state explicitly the difference between them.
 
 

3. [7 points] What do each of the initials stand for in the often-used macroeconomic identity

Y = C + I + G + X – M? For the US, which of the right-hand components is the largest?
 

4. [2 points] Define "opportunity cost."
 

5. [9 points] Label the two axes and the two sloped lines in the diagram below, so that it depicts a typical supply-demand scenario. If an effective industry-wide marketing campaign (such as "Pork: the other white meat") increases the total demand for the good described in the diagram below, use the diagram to illustrate what would happen (by drawing on the diagram and by writing a short sentence or two). Would the price of the good rise or fall? What factors determine how much the price would rise or fall?
 
 

6. [5 points] What’s the slope (positive or negative) of a typical supply curve? What does this tell you about the effect of increased price on supply? What accounts for this relationship? How does this relationship relate to the concept of economies of scale (define)?
 

7. [3 points] Define the terms "economic rent" and "location rent," so as to make clear the relationship between them.
 
 

8. [5 points] Define each letter on the right side of Equation 1. (Use plain English — no need for formal terms). It would be helpful (but not mandatory) to note the kinds of units in which each letter would be measured.
 

9. [1 point] Use these letters in Equation 1 to indicate what the location rent is at the center of the system described by this equation (i.e., the "y-intercept").
 

10. [6 points] How have we made use of Equation 1 to explain the geographic pattern of agricultural land use? Explain this, and list three of the assumptions we must make for us to use this approach to explaining the pattern of agricultural land use.
 

11. [5 points] Explain each letter (but not the subscript i) on the right side of Equation 2.
 

12. [2 points] What happens to the line described by Equation 2 if transportation costs increase (e.g., if the price of gasoline goes up, or if congestion makes all transportation take more time and thus more money)?
 
 

13. [10 points] Write a paragraph (probably with some graphic illustrations) that uses the approach encapsulated in Equation 2 to develop a model of urban land use. (In other words, Equation 2 alone is a model of location rent for an urban activity, not a model of urban land use). (What I’m looking for here is no more than what we did in class — no special creativity needed).

Write two additional paragraphs (probably with additional illustrations) that discusses two extensions of this basic model: how and why subsidiary nodes may form; what happens if the population and economy of the urban area increase; what happens if the optimal density of one type of urban activity (e.g., manufacturing) changes; what happens if transportation costs decrease; and/or what happens if zoning restricts the amount of land available for one type of activity.
 
 

14. [10 points] Write a brief essay on one of the following topics.

a. In our class discussion on Friday, we identified five mechanisms of urban growth management. Discuss two of these: (1) what are they; (2) how do they relate to our simple model of urban land use; (3) according to our model, what effect would they likely have on urban land prices, densities, configuration (what would be next to what, how large would zones be, etc.) — you may have to be creative in applying our somewhat limited model; (4) who might be against such a mechanism, and why? Given all these considerations, which of those two mechanisms, if either would you prefer to see implemented, and why?

b. In our class discussion on Friday, we discussed the pros and cons of the US attempting to adopt some of the policies to which the Brookings brief ("Fit for Fat City" by Pietro Nivola) attributed the relatively compact form of European cities. What are some (at least three) of these policy differences between Europe and the US? Why are US and European policies so different? If Europeans existed under the same policies as the US, would they develop as much urban sprawl and automobile dependence as US cities?