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One of influences influencing property prices is how pleasant the surrounding area is. Jim is a property developer, developing properties in Midtown.He also invests in
One of influences influencing property prices is how pleasant the surrounding area is. Jim is a property developer, developing properties in Midtown.He also invests in redevelopinglanewaysin this area.This has seen property prices in Midtown increase.
Which of the following statements are true:
- Jim's decision to redeveloplanewaysin Midtown is a positiveexternalityfor David who is alsoa property owner in Midtown.
- The marginal social benefit of developing alanewayexceeds the marginal private benefit realised by Jim.
- There is no positiveexternalityas Jim is considering the benefits to his own property developments when deciding whether to develop thelaneways.This means the "externality" has already been internalised.
- The marginal social benefit of developing a laneway would be less than the marginal private benefit of developing a laneway.
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