Question 1

According to the bid-rent model, which of the following individuals would be the one least likely to live closest to the central business district (CBD)? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD)
A) A barista at the local coffee shop who uses a car to commute.
B) A doctor at the city hospital who uses a car to commute.
C) A barista at the local coffee shop who must walk to work.
D) A doctor at the city hospital who must walk to work.

Accepted Answer

According to the bid-rent model, those who are able and willing to pay higher rent/mortgage are more likely to live closer to the CBD. In this scenario, a doctor is more likely to have a higher income compared to a barista and therefore more likely to afford to live closer to the CBD, regardless of their mode of transportation. The fact that the barista in option A uses a car to commute further supports this idea as it implies that they are commuting from further out, where housing is cheaper. Therefore, a barista who uses a car to commute is the least likely to live closest to the CBD.

Question 2

Based on your understanding of the effect of agglomeration economies in real estate, you would expect institutional investors to most favor real estate investments in which of the following areas?
A) small urban markets
B) large urban markets
C) small rural markets
D) large rural markets

Accepted Answer

Institutional investors are likely to favor real estate investments in large urban markets due to the agglomeration economies present in these areas. Larger cities often have diverse businesses, skilled workforce, and infrastructure that enhance economic growth, making them attractive to investors. Additionally, large urban markets often have higher levels of demand for real estate, which can lead to greater potential for financial return.

Question 3

A recent college graduate has obtained employment at a major financial institution in the big city. Since she just graduated, she has decided to continue to rent her college apartment in the suburbs and make the daily commute to the big city for work. She currently pays $1000 per month to rent an apartment in the suburbs. She works at the bank 5 days a week and it takes her 1 hour to commute from her home to her office. According to the assumptions of the bid-rent model, what should this recent grad be willing to pay in rent per month to live in the big city if her hourly wage rate is $20? (In your calculations, assume there are 4 weeks in a given month.)
A) $800
B) $1000
C) $1400
D) $1800

Accepted Answer

The answer of A recent college graduate has obtained employment...

Question 4

A new faculty member at the local university pays $1500 per month to rent an apartment in the downtown area. She teaches on campus 3 days a week and works from home the remaining 2 days. On the days in which she must commute, given the heavy traffic congestion, it takes her 2 hours to commute from downtown to campus. According to the assumptions of the bid-rent model, what should this professor be willing to pay in rent per month to live near campus if her hourly wage rate is $25? (In your calculations, assume there are 4 weeks in a given month)
A) $1200
B) $1500
C) $2100
D) $2700

Accepted Answer

The professor spends 12 hours commuting per month (2 hours per day * 3 days per week * 4 weeks). At $25 per hour, this is $300 worth of time. Adding this to her current rent of $1500, she should be willing to pay up to $1800 to live near campus. However, the closest option above $1800 is $2700, which is not a direct calculation but suggests a willingness to pay more for convenience.

Question 5

According to the bid-rent model, which of the following changes in the model's underlying assumptions would most likely result in an increase in rents for properties closest to the central business district (CBD)?
A) A decrease in an individual's hourly wage
B) A decrease in the average traveling speed of the individual's commute
C) A decrease in the number of households attempting to live in the area
D) A decrease in the number of days an individual must commute to work

Accepted Answer

The bid-rent model suggests that the closer a property is to the central business district (CBD), the higher the rent will be due to the desirability of shorter commutes. A decrease in the average traveling speed of an individual's commute would make locations closer to the CBD even more desirable, as it would increase the time and cost of commuting from further away, thereby increasing the competition and willingness to pay more for properties close to the CBD to reduce commute times.

Question 6

Based on the following information, determine the location quotient for Music City and whether this city has a competitive advantage in the entertainment industry. Employment in Entertainment in Music City: 3,020; Total Employment in Music City: 656,785; Employment in Entertainment (nationally): 2,160,970; Total Employment (nationally): 106,201,232.
A) 0.23; No, the city does not have a competitive advantage in this industry.
B) 4.43; No, the city does not have a competitive advantage in the industry
C) 0.23; Yes, the city has a competitive advantage in this industry
D) 4.43; Yes, the city has a competitive advantage in this industry

Accepted Answer

The answer of Based on the following information, determine the...

Question 7

Within some types of land use, business location may be determined by the type of service or products that are offered to consumers. Based on your understanding of the differences between comparison and convenience activities, which of the following providers would operate in the convenience activity space?
A) Supermarket
B) Car dealership
C) Large public university
D) Apparel store

Accepted Answer

Convenience activities are those that are purchased frequently and require easy accessibility. Supermarkets sell everyday items like groceries, which are purchased frequently and require convenient accessibility, making them an example of a convenience activity. Car dealerships, large public universities, and apparel stores may not fit this criteria as they do not necessarily require frequent visits or easy accessibility.

Question 8

Using the following information, determine the location quotient for this industry. Percentage of employment in financial services industry within the local community: 15%, Percentage of employment in financial services industry for the entire U.S.: 4.4%.
A) 0.3
B) 3.4
C) 10.6
D) 19.4

Accepted Answer

The location quotient (LQ) is calculated by dividing the percentage of local employment in a specific industry by the percentage of employment in that industry for a larger area or the entire country. In this case, LQ = (15% / 4.4%) = 3.4.

Question 9

An individual works downtown and pays $600 per month in rent for an apartment located 10 miles from her office. She has calculated that she spends 30 minutes per day driving each way to the office and it costs her $4 per day in gas and lost productivity. Using the framework of the bid-rent model, how much would she be willing to pay for an apartment downtown, assuming a 20 workday month?
A) $80
B) $440
C) $520
D) $680

Accepted Answer

The individual currently spends $4 per day on gas and lost productivity, which over a 20 workday month amounts to $80 ($4/day * 20 days = $80). Therefore, she could afford to pay her current rent of $600 plus the $80 she would save by not commuting, totaling $680 ($600 + $80 = $680) for an apartment downtown.

Question 10

Based on the following information, determine the location quotient for Amusement City and whether this city has a competitive advantage in the amusement industry. Employment in Amusements and Recreation in Amusement City: 54,446; Total Employment in Amusement City: 578,477; Employment in Amusements and Recreation (nationally): 1,381,377; Total Employment (nationally): 106,201,232.
A) 0.14; No, the city does not have a competitive advantage in this industry.
B) 7.24; No, the city does not have a competitive advantage in the industry
C) 0.14; Yes, the city has a competitive advantage in this industry
D) 7.24; Yes, the city has a competitive advantage in this industry

Accepted Answer

The location quotient (LQ) is calculated as (local industry employment / total local employment) / (national industry employment / total national employment). For Amusement City, LQ = (54,446 / 578,477) / (1,381,377 / 106,201,232) = 7.24. An LQ greater than 1 indicates a competitive advantage in the industry.

Question 11

Using the following information, determine the location quotient for Motor City. Employment in Motor Vehicle Manufacturing within Motor City: 12,643; Total Employment in Motor City: 560,379; Employment in Motor Vehicle Manufacturing (nationally): 152,750; Total Employment (nationally): 106,201,232
A) 0.1
B) 12.1
C) 15.7
D) 44.3

Accepted Answer

Location quotient = (Employment in Motor Vehicle Manufacturing within Motor City / Total Employment in Motor City) / (Employment in Motor Vehicle Manufacturing (nationally) / Total Employment (nationally))

= (12,643/560,379) / (152,750/106,201,232)

= 15.7

Therefore, the location quotient for Motor City is 15.7, which means that the concentration of employment in the motor vehicle manufacturing industry in Motor City is 15.7 times higher than the national average.

Question 12

Using the following information, determine the location quotient for Springfield. Employment in Aerospace Products within Springfield: 30,044; Total Employment in Springfield: 208,054; Employment in Aerospace Products (nationally): 474,905; Total Employment (nationally): 106,201,232
A) 0.03
B) 12.10
C) 15.70
D) 32.29

Accepted Answer

The answer of Using the following information, determine the location...

Quiz 5: Market Determinants of Value

According to the bid-rent model, which of the following individuals would be the one least likely to live closest to the central business district (CBD) ? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD)

Based on your understanding of the effect of agglomeration economies in real estate, you would expect institutional investors to most favor real estate investments in which of the following areas?

According to the bid-rent model, which of the following changes in the model's underlying assumptions would most likely result in an increase in rents for properties closest to the central business district (CBD) ?

Using the following information, determine the location quotient for this industry. Percentage of employment in financial services industry within the local community: 15%, Percentage of employment in financial services industry for the entire U.S.: 4.4%.

Using the following information, determine the location quotient for Motor City. Employment in Motor Vehicle Manufacturing within Motor City: 12,643; Total Employment in Motor City: 560,379; Employment in Motor Vehicle Manufacturing (nationally) : 152,750; Total Employment (nationally) : 106,201,232

Using the following information, determine the location quotient for Springfield. Employment in Aerospace Products within Springfield: 30,044; Total Employment in Springfield: 208,054; Employment in Aerospace Products (nationally) : 474,905; Total Employment (nationally) : 106,201,232