Question 1: Urban Housing (20 points)

Housing policy: Housing subsidies vs. Cash offer

A low income household has a monthly income of 900, and is qualified to receive certain welfare from government in housing.

This household has the following utility function and faces the following market information:

U = X.Y where X is the housing consumption (sq.) while Y represents all other goods; Price of X (housing per square foot) is $0.5, and price of Y (all other goods) is normalized to be $0.75. Hint: MRS = Y/X

A. What will be the consumption bundle for this household when no subsides or welfare is offered? (hint: utility maximization given the budget constrain)
B. What will be the consumption bundle if this household receives a cash offer of 300 per month from government?
C. Instead of receiving cash offer, they are subsidized by a housing voucher program, which specifies their out-of-pocket cost for housing is $270 per month. To keep this household equally happy as in (B receiving cash offer),
a. What will be their consumption bundle?
b. How much is the subsidy amount from government?
c. Compare to the cash offer, which program is more cost effective from tax payer’s perspective?

Question 2: Urban Transportation (20 points)
Download the file for Cincinnati from the following link
The above file is from Urban Mobility report 2017 (its press release) published by TTI.
Based on the report and what we have discussed on issues in urban transportation
A. This reports data on congestion level in Cincinnati metropolitan areas from 1984 to 2017.
A1. Conduct a trend analysis for key congestions measures such as TTI, PTI, annual hours of delay per commuter, excess fuel consumed due to congestion.
A2. Identify possible reasons for the trend identified and provide supporting evidence.
B. If reducing congestion is desirable, what types of policy pools should be implemented to systematically change the congestion level? For each recommendation you make, discuss the advantage and limitations.

Question 3: Assuming the following: Ohio Department of Transportation and Kentucky DOT are considering converting I-471 to be a toll road and considering using the toll collected to provide additional fund to improve transit services in and out of downtown Cincinnati. You are hired as an economic analyst by a local non-profit organization representing local residents’ interest. You are required to conduct an economic analysis answering the following questions. (25 points)
1.Identify who will be affected by this potential change from a public free road to toll road? Be specific.
2. In which way those identified can be affected? Why? If and how can you get your supporting evidence?
3. What could be the marginal benefit if I-471 becomes a toll road? How about marginal cost?
4. How to determine what is the right toll rate for that 7 –mile toll road?
5. Organize your analysis and write a draft comment letter to ODOT and KDOT to address this potential change.

Question 4: (25 points)
Based on the article: on the performance of the US transportation system
1. What are the economic theories on the efficient provision of transportation in the US? Provide the logic clearly for private and public ownership.
2. Discuss the impact of the US transportation infrastructure on travel pattern and land use pattern and Chapters 7-8
3. Given the fact that user fees are far from sufficient to cover the highway (and transit ) expenditures, discuss the possible solutions to reduce congestion.
4. Discuss the key factors that result in low ridership of public transit in general and discuss the possible solutions.

Question 5: Empirical Analysis (10 points)
Use the data provided in (Urban Economics Data 1)
1. The dataset provides variables to measure land use controls (from column Z to column AG), discuss the hypotheses of the impact of those variables on urban spatial size (column W)
2. Run a regression with urban spatial size as dependent variable and land use control variables in addition to standard monocentric urban variables (population, income, rural land rent, and transportation cost) and report the results in a table.
3. Discuss your results of each land use control variables (whether it is statistically significant, whether consistent with your hypothesis; if not , what could be possible explanations).



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