A Building Owner Charges Net Rent of $20 in the First

question 31

Multiple Choice

A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year, but is providing six months of free rent in the first year as a concession. Using a 10 percent discount rate, what is the effective rent over the three years?

• A) $17.28
• B) $20.00
• C) $20.94
• D) $21.00
• E) $21.73

---

Definitions:

Consumption

The process by which goods and services are used by households and individuals, leading to a decrease in their availability.

Negative Externalities

Negative effects or costs that are incurred by third parties as a result of economic activities, for which they are not compensated, such as pollution.

Equilibrium

Equilibrium represents a state of balance where there is no net tendency for change, often used to describe the point at which market supply and demand balances each other.

External Benefits

Positive effects that an activity or transaction has on individuals or entities who are not directly involved in the activity, often justifying government intervention or subsidies.