Marking card questions 1 4 refer to

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Unformatted text preview: oduction cost (non- rent costs per unit) at the profit maximizing quantity is denoted in each diagram. Assume all farmers have the same productivity on a given piece of land and assume free entry and a competitive market for land. 1) Which parcel—after rent is paid—will yield the highest profits for the farmer? A) Parcel I. B) Parcel II. C) Parcel III. D) All will yield the same profits. E) All will yield negative profits and so won’t be farmed. 2 2) The pre- rent profit associated with the least fertile parcel of land is A) $2,000 B) $2,500 C) $20,000 D) $47,500 E) $50,000 3) Given the annual rent earned by Parcel II in equilibrium, what would we expect Parcel II to sell for? Assume the annual interest rate is 5% A) $8,000 B) $160,000 C) $800,000 D) $1,440,000 E) None of the above. 4) Suppose that instead of remaining fixed, the world price of grain falls by $0.25 per bushel and that the price decrease is permanent. Which of the following statements is true? I. With continually renewed rental contracts, the landlords experience a decrease in rental income. II. With continually renewed rental contracts, the farmers experience a decrease in overall profits. III. With long- term rental contracts (assume 1 year contracts), both farmers and landlords suffer from the price decrease. A) I and III only. B) I and II only. C) I only. D) II only. E) III only. 3 5) Holding city population constant, cities in China have greater population density than cities in Canada. Which of the following is likely to contribute to the relatively greater density of Chinese cities? I. The typical Chinese person earns less income than the typical Canadian. II. The typical Canadian is more likely to drive a car than the typical Chinese. III. Agricultural subsidies are greater in Canada than in China. A) I only. B) II only. C) III only. D) I and II only. E) I, II, and III. 6) Assume all land users prefer locating as near as possible to the center of the city. Consider the bid- rent function for office firms. Assume that office firms experience technological change that increases their ability to engage in factor substitution, while the technology of residential and manufacturing land use remains un...
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