Smith and Jones live in virtually identical homes in the same town. Smith sends her children to a private school because the public school in her part of town is a low-ranked school. Annual tuition per student at the private school is $19,000. Jones sends her children to the high-ranked public school on her side of town. Tuition per student per year at the public school is $0. Most people believe that the private school and the public school in Jones's neighborhood are equivalent when it comes to educating students. According to a theory discussed in the textbook,
A)the price of Smith's house is probably higher than the price of Jones's house.
B)the price of Jones's house is probably higher than the price of Smith's house.
C)Smith and Jones live in homes that are priced the same.
D)the reputations of schools have no impact on housing prices.

Question

Smith and Jones live in virtually identical homes in the same town. Smith sends her children to a private school because the public school in her part of town is a low-ranked school.  Annual tuition per student at the private school is $19,000.  Jones sends her children to the high-ranked public school on her side of town.  Tuition per student per year at the public school is $0.  Most people believe that the private school and the public school in Jones's neighborhood are equivalent when it comes to educating students. According to a theory discussed in the textbook,
A)the price of Smith's house is probably higher than the price of Jones's house.
B)the price of Jones's house is probably higher than the price of Smith's house.
C)Smith and Jones live in homes that are priced the same.
D)the reputations of schools have no impact on housing prices.

Quizplus · Accepted Answer

Jones's decision to send her kids to the public school indicates that she values the good schools in her neighborhood. This suggests that her home is likely more expensive than Smith's, whose decision to send her children to a private school indicates that she is willing to pay extra for better education.

Smith and Jones Live in Virtually Identical Homes in the Same