Question

A simple monocentric city (Roundville) has a population of 3,000,000 with a homogeneous density of 5 inhabitants per acre, and one person per household. Agricultural rents are $500/acre/yr, housing construction costs (including developer profit) can be paid for with a perpetual loan charging interest of $5000/house/yr, and transportation costs are $250/person/yr per mile of distance from the center of the city. (Recall that there are 640 acres per Mi2.)
What is the annual location premium rent per household in the center of Roundville?
(a) $4,320.
(b) $5,740.
(c) $21,600.
(d) $25,500.

Answer

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