1. Which of the following statements are TRUE? A. As we move to the left along an indifference curve, the utility obtained by the household increases. B. A utility curve holds different combinations of goods that give the same utility. C. Higher indifference curves (i.e., indifference curves positioned higher and to the right) repress higher utility. D. The only way to obtain a higher utility is to make more money. (1) A and D only (2) B and C only (3) B, C, and D only (4) All of the above 2. Why do land prices increase as we move closer to the city? (1) Households are willing to bid more for land closer to the city centre because commuting costs are low (2) Identical households must reach the same level of utility in equilibrium. Otherwise, someone will have an incentive to change his or her behaviour. If houses closer to the city are not me expensive, all households will want to move there. (3) Land prices increase as we move closer to the city because lots are maintained better. (4) Both (1) and (2) are correct. THE NEXT THREE (3) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: Consider a monocentric city in which every household occupies one-fifth of an acre of land ((* = 0.3) Suppose that the cost of commuting is $50 per mile per month for a round trip (t = $50). Finally, supp that a 0.20-acre lot 10 miles from the city centre (d = 10) rents for $1,000 per month. 3. What is the slope of the household bid rent function? (1) -1,000 (2) +50 (3) -250 (4) -50 4. What is the bid rent per acre at a distance of 5 miles? (1) 1,250 per acre (2) 5,500 per acre (3) 6,250 per acre (4) 7,500 per acre Assignment continues on the following page @Copyright 2016 by the UBC Real Estate Division Urban and Real Estate Economics ASSIGNMENT 5, continued 5. Calculate the land rent and commuting cost for someone living at a distance of 10 miles. (1) Land rent = $1,000 per month and commuting cost = $500 per month (2) Land rent = $1,250 per month and commuting cost = $250 per month (3) Land rent = $500 per month and commuting cost = $1,000 per month (4) Land rent = $1,500 per month and commuting cost =$0 per month THE NEXT TWO (2) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: Consider a closed monocentric city with a population of 100,000 in which each household occupies 0.25 acres of land. Agricultural land rent is $1,000 per acre per year, and commuting costs are $250 per mile per year round trip. (There are 640 acres in a square mile). 6. Where is the border of the city in miles? (1) 3.5 miles (2) 6.25 miles (3) 12.45 miles (4) 39.1 miles 7. What is the annual rent (per acre) on land at the border? (1) $1,875 per acre (2) $125 per acre 3) $1,000 per acre (4) $500 per acre 8. What is the impact of a transportation improvement on the bid rent curve in a city with a fixed population and flexible lot sizes
