Suppose Two Neighborhoods (A AndB)have Identical Housing,but Neighborhood a Has

question 122

Multiple Choice

Suppose two neighborhoods (A andB) have identical housing,but neighborhood A has a strictly enforced deed restriction that prohibits homeowners from parking junk cars in the front yard.If houses in neighborhood A sell for $105,000 and houses in neighborhood B sell for $100,000,how would an economist value the external cost of visible junk cars,per house?

• A) $205,000
• B) $105,000
• C) $100,000
• D) $5,000
• E) None of the above answers is correct.

---

Definitions:

Asset Improvements

Expenditures made to increase the utility or extend the useful life of an asset.

Extraordinary Repairs

Repairs that are infrequent, large in scope, and extend the useful life of an asset beyond its original estimate.

Paved Parking

An area specifically designated and constructed for parking vehicles that is covered with a hard, smooth surface such as asphalt or concrete.

Land Improvements

Enhancements made to land to increase its value or utility, such as landscaping, paving, and installation of utilities, which are typically depreciable over their estimated useful life.