Consider a region with two standardized products (bread and shirts) that are transported by horse-drawn wagons. There is a single trading city. Consider the effects of a new matter transmitter, an indivisible input that is economical for trading firms in the city, but not economical for an individual household. A transmitter instantly transports goods from a production site (a farm or workshop)to the trading firm, and the marginal cost of transport is zero.
a. The labor used in transporting products from production sites to trading firms will [increase, decrease, not change] because. . . .
b. The volume of trade in the region will [increase, decrease, not change] because. . . .
c. The labor used in processing transactions (banking, accounting, insuring)will [increase, decrease, not change] because. . . .
d. The trading city will grow if _____ exceeds _____ .
e. Suppose the transmitter technology changes, and it becomes economicalfor an individual household. The trading city will [grow, shrink, disappear]