Simulating the physics is a tricky concept. If you were born in the matrix, how would you know any physics was "wrong?" Only those who escaped the matrix would know.
However, we can do some herustics on scene generation. Our movies are the closest to "photo realistic" we're going to get, so we can use that as a benchmark. Transformers: Dark of the Moon provided an interview in which they said the most complex scenes they rendered took 288 CPU hours per frame. Multiplying that by a crude 30 frames per second, and you need just shy of 900 CPUs to keep up. With, say, 10,000 residents, that's 9,000,000 CPUs, dedicated to nothing but rendering.
What does that look like? We don't make them that big. To give you a sense, here's Mira
Mira is a Blue Gene/Q hosted at Argonne National Lab. She's got 65,000 processors.
So imagine Mira, cloned about 150 times, side by side. That's your scene generator.
Now, that being said, the problem is actually worse. Those speeds assume rendering is perfectly parallelizable. It isn't. So you'll run into issues there. You could also save some time by only rendering what's in the fovea of each person, but now you have to be able to respond to changes in the eye within the blanking period of a saccade. That's a hard real time challenge. But at least it gives you a sense of scale.