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Assignment:
The City of Gotham is one of many cities in the DC universe. Free migration is allowed across all these cities. The City of Gotham used to be crime-ridden. Since the city government cooperated with Batman, the crime rate has dropped dramatically. Suppose people in general likes low crime rate, although crime rate is irrelevant for firm's productivity. All residents of Gotham work full time and each resident rents an apartment. The wage rate for each worker reduces by 1,000 dollars each month and the rent increases by 500 dollars.
(a) Can you say anything about how much do residents of Gotham value the lower crime rate? Explain.
(b) Suppose migration is costly across cities, given the same wage rate and rent changes, is Gotham residents' valuation for lower crime rate higher or lower than your answer in (a)? Explain.
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