Question

An important effect of agglomeration economies on real estate is its impact upon market risk. Based on your understanding of this relation, which of the following statements is true?

(a)-Properties located in a city with more advanced development of agglomeration economies will carry more risk and therefore suffer a smaller price decline during an economic downturn than comparable properties in a city with less agglomeration.
(b)-Properties located in a city with more advanced development of agglomeration economies will carry more risk and therefore suffer a larger price decline during an economic downturn than comparable properties in a city with less agglomeration.
(c)-Properties located in a city with more advanced development of agglomeration economies will carry less risk and therefore suffer a smaller price decline during an economic downturn.
(d)-Properties located in a city with more advanced development of agglomeration economies will carry less risk and therefore suffer a larger price decline during an economic downturn than comparable properties in a city with less agglomeration.

Answer 1

The answer is: C) Properties located in a city with more advanced development of agglomeration economies will carry less risk and therefore suffer a smaller price decline during an economic downturn.

Step-by-step explanation:

Agglomeration economies refer to the economic benefits associated with people and businesses locating near one another, this is how villages were formed, then they turned into small towns and later big cities.

We can use an opposite situation as an example: mines are usually located far away from cities, so when a big mine is set up, houses and stores are also set up near the mines. When the mines stops operating, everything is left behind and the houses and stores are left empty and are worthless.