Question

In efficient financial markets, unregulated competitive bidding should bring about the most productive use of an asset and the price paid for that asset should reflect fair value based on its usefulness. In real estate, this is not always the case. For example, there is no substitute for certain pieces of land which gives the owner a bargaining advantage in determining the value of the land. This feature of real estate markets is commonly referred to as

a. incomplete information
b. locational monopoly
c. positive externality
d. negative externality

Answer 1

Answer: Option (b) is correct.

Step-by-step explanation:

Monopoly refers to the a single firm operates in a market and it is a price maker. In this kind of market condition, the prices of the goods are normally higher. Locational monopoly is largely related with the real estate. When there are no substitutes for a land then this will create a monopoly power among the seller of land. This will give an bargaining advantage to the real estate owner to fix higher value on their piece of land.