BUSI 300 URBAN ECON QUESTIONS WITH VERFIED SOLUTIONS LATEST UPDATE 2026
Agglomeration economies - Answers Clustering of firms that promote economies of scale - includes
sharing input suppliers, decreased transport costs, and easier access to diverse workforce. Aka
external economies of scale. 2 kinds - urbanization (benefits due to city size) and localization (benefits
due to size of industry)
Absorption rate - Answers Rate at which real estate units are sold in a market during a particular time
period
Asset market - Answers Market where land and buildings are traded with primary concern being the
buying and selling of re assets
basic goods - Answers Exports production generating new money and growth in domestic econ
Bid rent - Answers Max amount firm or household willing to pay to occupy land for a given time
period
Capitalization Rate - Answers The rate of return considered to be a reasonable return on investment -
given the risk. Ratio of rent to price of asset
Central place theory - Answers Large cities contain much more diverse set of Econ activities than
small
Coase theorem - Answers States that private bargaining will result in an efficient allocation of
resources. Requires well defined property rights, perfect information, and zero transaction costs
Congestion dependent costs - Answers Costs that are a function of the amount of traffic on the road
(increases travel time, fuel usage)
Congestion independent costs - Answers Costs largely incurred by drivers before get on road - cost of
owning or leasing, insurance, time and fuel cost of travel absent of congestion
Congestion toll - Answers Difference between PC and TC at to socially optimal traffic volume
Discount rate - Answers Interest rate used to adjust future cash flows to a present value by taking
into account the time value of money as well as uncertainty of future cash flows
Downs law - Answers Congestion rises to meet max capacity
Economies of scale - Answers Cost advantages that firm obtains due to size where larger firm
becomes the lower the cost per unit
Equilibrium - Answers State of balance between market forces of supply and demand that result in an
efficient price level and quantity of goods supplied
Equilibrium land rent is rent actually observed in market and is highest bid rent for any site
Extensive margin - Answers Boundary of agricultural land area in the bin thunen model where land
isn't utilized as not economical to ship goods to market
Filtering - Answers Household mobility changes to availability of housing stock as when some
households move up to newer housing the older stock becomes more affordable - housing stock
filters down
Fiscal social problem - Answers Aka flight from blight. View that suburbanization has been hastened
or encouraged by number of problems seemingly endemic to older (US) areas
Fundamental theorem of welfare Econ - Answers Under perfect competition everyone pursuing his or
her self interest arrive at efficient allocation of resources (aggregate welfare maximized) - invisible
hand
Gentrification - Answers The rehabilitation of deteriorated, often abandoned, housing of low-income
inner-city residents.
Headship rate - Answers # of households per 100 persons in population
hedonic pricing - Answers Decomp of p into constituent parts-each characteristic assigned monetary
value according to its contribution to overall p
Highest and best use - Answers Idea that land should be developed to provide greatest value to
society and promote Econ efficiency
Household - Answers All individuals occupying housing unit
Indifference curve - Answers Graph of bundles of consumption that a consumer finds equally
desirable. It extends outward for higher budgets
Location quotient - Answers Percentage of employment regionally in particular industry divided by
percentage employment nationally in Industry. A larger quotient than 1 indicates this industry is more
important regionally than nationally
Marginal benefit - Answers Change in total benefit from consuming one more unit of good
Agglomeration economies - Answers Clustering of firms that promote economies of scale - includes
sharing input suppliers, decreased transport costs, and easier access to diverse workforce. Aka
external economies of scale. 2 kinds - urbanization (benefits due to city size) and localization (benefits
due to size of industry)
Absorption rate - Answers Rate at which real estate units are sold in a market during a particular time
period
Asset market - Answers Market where land and buildings are traded with primary concern being the
buying and selling of re assets
basic goods - Answers Exports production generating new money and growth in domestic econ
Bid rent - Answers Max amount firm or household willing to pay to occupy land for a given time
period
Capitalization Rate - Answers The rate of return considered to be a reasonable return on investment -
given the risk. Ratio of rent to price of asset
Central place theory - Answers Large cities contain much more diverse set of Econ activities than
small
Coase theorem - Answers States that private bargaining will result in an efficient allocation of
resources. Requires well defined property rights, perfect information, and zero transaction costs
Congestion dependent costs - Answers Costs that are a function of the amount of traffic on the road
(increases travel time, fuel usage)
Congestion independent costs - Answers Costs largely incurred by drivers before get on road - cost of
owning or leasing, insurance, time and fuel cost of travel absent of congestion
Congestion toll - Answers Difference between PC and TC at to socially optimal traffic volume
Discount rate - Answers Interest rate used to adjust future cash flows to a present value by taking
into account the time value of money as well as uncertainty of future cash flows
Downs law - Answers Congestion rises to meet max capacity
Economies of scale - Answers Cost advantages that firm obtains due to size where larger firm
becomes the lower the cost per unit
Equilibrium - Answers State of balance between market forces of supply and demand that result in an
efficient price level and quantity of goods supplied
Equilibrium land rent is rent actually observed in market and is highest bid rent for any site
Extensive margin - Answers Boundary of agricultural land area in the bin thunen model where land
isn't utilized as not economical to ship goods to market
Filtering - Answers Household mobility changes to availability of housing stock as when some
households move up to newer housing the older stock becomes more affordable - housing stock
filters down
Fiscal social problem - Answers Aka flight from blight. View that suburbanization has been hastened
or encouraged by number of problems seemingly endemic to older (US) areas
Fundamental theorem of welfare Econ - Answers Under perfect competition everyone pursuing his or
her self interest arrive at efficient allocation of resources (aggregate welfare maximized) - invisible
hand
Gentrification - Answers The rehabilitation of deteriorated, often abandoned, housing of low-income
inner-city residents.
Headship rate - Answers # of households per 100 persons in population
hedonic pricing - Answers Decomp of p into constituent parts-each characteristic assigned monetary
value according to its contribution to overall p
Highest and best use - Answers Idea that land should be developed to provide greatest value to
society and promote Econ efficiency
Household - Answers All individuals occupying housing unit
Indifference curve - Answers Graph of bundles of consumption that a consumer finds equally
desirable. It extends outward for higher budgets
Location quotient - Answers Percentage of employment regionally in particular industry divided by
percentage employment nationally in Industry. A larger quotient than 1 indicates this industry is more
important regionally than nationally
Marginal benefit - Answers Change in total benefit from consuming one more unit of good
