Theoretically, if an entire major city's connection with the outside world was cut off, could all the infrastructure within the city function as a really big city-wide LAN?
Yes. You might need a dhcpd on a laptop though, if your city's IP management is outside the said city (Cable/DSL modems needs their own IPs, unless they are static).
...and possibly a small DNS server (or a hosts file somewhere easy to get).
That's all you need.
If you want to navigate via IPs only, you can do with a DHCPd.
