A city recently purchased acreage from a farmer for housing development. It then divided the land area into a series of equal sized lots on which to build houses. However, some of the lots are located near an old lead smelting plant. A recent study found that these lots did have some ground contamination resulting in an annual loss of value equal to $125 per lot. At a discount rate of 10%, the resulting reduction in price for these lots is

Group of answer choices

$137.50

$1,250.00

$1,375.00

$125.00

Refer back to the previous question. What would happen if the federal government were to subsidize housing insurance for property losses due to lead contamination in the soil?

Group of answer choices

More lots closer to the lead smelting plant would be condemned and the owner paid a fair market price for this taking.

The government would have more money to spend on soil cleanup because more taxes can be collected on sold lots.

More lots closer to the lead smelting plant would be sold.

There will be no effect on the land market.