If Land Becomes Less Valuable in Residential Use Than in Commercial

question 123

Multiple Choice

If land becomes less valuable in residential use than in commercial use

• A) the supply of land available for commercial use should increase and the supply of land for residential use should decrease.
• B) there can be no change in the allocation of land because land is fixed in supply.
• C) there will be no change in the allocation of land, as there is no responsiveness to price changes by suppliers of land.
• D) the supply of land for commercial use will become perfectly inelastic and the supply of land for residential use will become perfectly elastic.

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Definitions:

Average Operating Assets

The average value of the assets involved or used in the operating activities of a company over a given period, typically calculated as the average of the opening and closing balances of these assets.

Residual Income

Earnings that exceed the minimum required return on investment; it's what remains after all costs and expenses have been deducted.

Return on Investment

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments, calculated as net profit divided by the cost of the investment.

Gross Margin

The difference between revenue and cost of goods sold, divided by revenue, expressed as a percentage.