If the government designates certain areas within a community to be wetlands, and therefore illegal to build upon, what happens to land not classified as wetlands within the community?
(i) the marginal product of land will fall
(ii) the marginal product of land will rise
(iii) the price of land will rise

Question

Quizplus · Accepted Answer

When the government designates certain areas as wetlands, making them illegal to build upon, the supply of land available for development decreases. This makes the remaining non-wetland land more valuable and in higher demand, leading to an increase in both its marginal product (as it becomes more critical for any development purposes) and its price.

If the Government Designates Certain Areas Within a Community to Be