What Happens to the Cost of Growing Crops on a Particular

question 29

Multiple Choice

What happens to the cost of growing crops on a particular farm when the land is rezoned from agricultural to industrial use and its price triples?

• A)The cost rises, but only if the farmer rents the land from someone else.
• B)There is no change unless industrialization somehow interferes with farming.
• C)The cost will probably fall, because industrialization is often incompatible with farming.
• D)The cost rises, even if the farmer owns the land.

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Definitions:

Revolving Credit Agreement

A credit facility extended by a lender to a borrower that allows the borrower to draw down or withdraw, repay, and redraw loans advanced to it up to a certain agreed amount.

Speculative Demand

Demand for a good or service based not on its inherent value or utility, but on expectations of future price changes or market conditions.

Abrupt Drop

A sudden and steep decline in the value or level of something, such as the stock market or an individual stock.

Marketable Securities

Highly liquid short-term debt investments held by companies instead of cash. Marketable securities provide nearly the liquidity of cash but earn a modest return.