Within the Framework of the Bid-Rent Model, as Rents Increase

question 23

Multiple Choice

Within the framework of the bid-rent model, as rents increase with proximity to the central business district (CBD) , the tendency is for development to:

• A) spread to the outskirts of the city
• B) build upward on lots within the CBD to allow multiple tenants
• C) cease completely
• D) focus on low-income housing projects.

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Definitions:

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks, used in finance to price risky securities.

William Sharpe

An economist who created the Sharpe Ratio, a measure to calculate risk-adjusted return.

SML (Security Market Line)

A line in the Capital Asset Pricing Model that shows the relationship between the expected return of a security and its risk.

Risk Averse

A tendency to prefer certainty over uncertain outcomes to minimize exposure to financial loss.