Final answer:
The highest and best use of a parcel of land is the use that creates the greatest value for the land. This is determined through a cost-benefit analysis to achieve utility maximization, where the optimal balance between costs and benefits is reached.
Step-by-step explanation:
The concept of highest and best use pertains to the use of a parcel of land that results in the greatest value for that land. When assessing various options for land use, whether one considers building a house, a gas station, a park, or leaving it undeveloped, it is essential to evaluate through a cost-benefit analysis.
The optimal use of land is identified by examining the point at which the marginal benefits of restoration or development are equal to the marginal costs. For instance, if the optimal amount of restored land is said to be 300 acres, it means that beyond this point, the cost of further restoration is not justified by the additional benefit received.
Following the principle of utility maximization, the greatest use is one which provides the greatest amount of happiness or satisfaction to the most number of people. Therefore, the highest and best use is the one that creates the greatest value for the land, reflecting an optimal balance between costs and benefits and likely contributing to wider economic and social utility.