Geog. 461. LOCATION AND LAND USE
QUESTIONS FROM SECOND HOUR EXAMINATIONS

Covers through Spring, 1996; more recently used ones are at the bottom

Typically you will be asked to answer thirty-three points worth of questions. Responses to more than thirty-three points will be scaled downward proportionally. Thus, if you attempt forty points worth of questions and successfully answer thirty, your recorded score will be 33(30/40)=25. Your time likely will have been better spent concentrating on the specified number of questions. When you are finished, on this exam form encircle the numbers of the questions you chose to answer (and want me to grade) and submit it with your responses.

Question Number (Point Value) Question or Challenge

  1. (6) Benefit/Cost analysis has been criticized as a criterion used by governmental agencies for evaluating project plans on the bases of 1) dissociation of benefits from costs, and 2) inappropriate selection of discount rates. Discuss
  2. (10) An owner of a forest considers years-waited between tree planting and cutting as being analogous to "inputs" in the context of a Value Product Analysis, hoping to identify planning periods associated with maximum percent returns, maximum net returns, and maximum gross returns. What are the impacts on these three planning periods of discounting anticipated incomes to "present values?" Account for the difference between the two sequences in which the three periods end under conditions of discounting and not discounting.
  3. (8)Consider land speculation: under what economic conditions is it likely to occur? ...where on the landscape is it likely to be found? ...how can its presence be recognized? ...what is its cause?
  4. (4) Differentiate between "waiting costs" and "ripening costs."
  5. (6) What is the significance of the term "residual" in the "building residual" and "land residual" approaches to appraising income-producing properties? What provision is made for recapturing capital invested in improvements and attachments to land in these schemes? Why is no provision made for capital recovery when attributing income to land?
  6. (6) The "summation method" is one scheme for determining future income capitalization rates. How does it take into account concerns of investors and the risks associated with each?
  7. (6) Develop the notion of "transition zone" (as in Murphy's expansion of Burgess's spatial model of urbanization patterns) from Barlowe's discussion of margins of transference.
  8. (4) Differentiate between the "materials survey" and the "unit-in-place" methods for placing values on structures.
  9. (1)) How do the "discounted net present value" and the "internal rate of return" investment-evaluation procedures differ? Under typical conditions, how do their optimum planning periods compare? Under what special conditions might the discount rate for the former and the percentage rate of return for the latter be the same for operators seeking to determine optimum planning periods? Under these special conditions, how do the planning periods compare?
  10. (8) What are the economic-geographic implications of government policies promoting industrial decentralization--U.S. regional air-quality control standards may have this consequence. How might production scales of manufacturing establishments forced to operate at "remote" sites be impacted? Will their suppliers and/or customers be affected?
  11. (6) Differentiate among "contract rent," "land rent" and "economic rent."
  12. (4) What is "conservation?"
  13. (4) Under conditions of varying incremental costs of project scales, how might one identify those scales likely to yield maximum percent, net and gross benefits?
  14. (6) The owner of a newly planted forest anticipates a one-time payment at the time of cutting in, say, thirty-five years. A large forest-products firm offers to purchase the land and trees today for a stated price. How might the owner evaluate the offer?
  15. (8) Determining "discounted net present values" (DNPV) of accumulating, annually received benefits enables developers to anticipate numbers of years required for discounted returns to be maximized. Of what value is such knowledge? What is the effect on planning-period length of adopting the higher of two discount rates that might be considered in a hypothetical DNPV analysis.
  16. (6) Differentiate between "highest comparative advantage" and "lowest comparative disadvantage."
  17. (8) The notion that rent is an "unearned increment" accruing to land owners was recognized by David Ricardo, Karl Marx and Henry George, all of whom were "social critics" in their days. Discuss the thinking of any two of these. ...all three for a couple of "bonus points."
  18. (8) Even when many available suburban locales afford land rents that are at best only equal to those of few available urban sites, why might operators elect to locate businesses in their suburbs rather than within central cities?
  19. (8) Assuming inputs to be continuously variable, verify my estimates of land rents generated over a short time period for sites at 20 and 80 distance units from the point of minimum aggregate transportation costs for an operator whose marginal and average production costs vary with output levels and shown below. Are my estimates are $35.00 and $18.00, respectively, close--within $5.00--to yours? If not, provide your land rent estimate[s] for the errant one[s].
  20. (10) Consider two operators producing the same thing in the same way, with identical factor costs--payments to labor and capital, etc. One is close to the market at which they sell their products under competitive conditions and the other is quite far away. Justify differences in scales of operation that each may select in order to maximize net returns (max(TR-TC)). How might their production intensities differ if both decide to maximize percentage returns (max(TR/TC))? Compare the ranges of profitable operating intensities available to each.
  21. (4) Write an equation for calculating the present value of future income expected at a particular time in the future and define all of its terms.
  22. (8) Differentiate among "cut-off period," "pay-back period," "average rate of return" and "net average rate of return."
  23. (8) Differentiate between "spatial margin of transference" and "spatial margin of production." Differentiate between "extensive margin of land use" and "extensive margin of production."
  24. (8) Differentiate between "development-" and "supersession costs" arising from land redevelopment.
  25. (6) Of what significance is "geometry"--distance and area--in situations where manufacturers consider relocating production activities and are confronted with having to select among sites located at varying distances from large market centers? Under what circumstances might operators prefer more remote locations with relatively low land-rent potentials to more central sites with higher ones?
  26. (8) Write an equation for calculating the present value of future income expected at one particular time in the future. Write a second equation for calculating the present value of future income expected each year for a particular number of years into the future. Define all terms in both equations.
  27. (8) Differentiate between "spatial margin of transference" and "spatial margin of production." Differentiate between "intensive margin of land use" and "intensive margin of production."
  28. (10) Refer to the attached table. .us Note that input-units cost $4.00 each. How many input units will be consumed when the three tracts are used at or just below their intensive margins of land use? Has the analysis been carried far enough to recognize the intensive margins of production for any of the tracts (and, if so, which ones and how many input units would be consumed by each to sustain operations at that level)? Following the equimarginal principle, how would you allocate thirty of the $4.00 input units among the three tracts and what would be the net return?
  29. (6) Differentiate among the "economic law of diminishing returns," the "physical law of diminishing returns" and the "secular law of diminishing returns."
  30. (6) The term "spatial margin of production" is used to describe the locus of points on a landscape on one side of which production of some output is prohibited because of transportation costs. Compare this term to "extensive margin of land use," which can be derived from a cost analysis of operators' production.s
  31. (8) When Ricardo spoke of "natural fertility" as being the key determinant of agricultural land value, he really implied a number of environmental characteristics that contribute to agricultural productivity of land. What natural characteristics contributed to making lands in the colonies more productive than land in Britain?
  32. (6) Dependency is a critical factor in determining demands for land resources in many regions and, indeed, may reach crisis levels in the future. Discuss.
  33. (8) Assuming that competitive market conditions prevail and all producers of some output use the same means of production, describe the effects of varying distances from markets on the following: a)$intensive margin of land use; b)$extensive margin of production; c)$range of profitable operation scales; d)$prices paid at markets
  34. (6) Assuming all producers of some output use the same means of production, describe the effects of varying distances from markets on operators attempting to follow the "equimarginal principle" as they commit inputs to operations at sites located near the market, near the spatial margin of production, and at places between the two.
  35. (4) What is meant by the term "highest and best use?"
  36. (8) In what ways can you describe the limits to the "zone of rational behavior" in the context of Value Product Analysis? (Hint: maximum MVP is not one of the ways.)
  37. (6) What sorts of changes are accounted for in the notion of the demographic transition, and in what sequences to they reach their maxima?
  38. (4) Differentiate between the terms "highly elastic" and "highly inelastic" in the context of either demand or supply schedules.
  39. (8) Differentiate between "margins of transference" and "zones of transference." How are they related geographically? How are they related to "spatial margins of production?"
  40. (8) Cast Barlowe's notion of the "extensive margin of land use" into the contexts of Ricardo and Von Thunen.
  41. (6) Simon's article, "Resources, Population, Environment: An Oversupply of False Bad News," seems to question Marshall's "secular law of diminishing returns." Discuss.
  42. (6) Differentiate between migratory and sedentary agriculture as regards people's relationships with the resources on which they depend.
  43. (6) Consider two operators producing the same thing in the same way, with identical factor costs--payments to labor and capital, etc. One is close to the market at which they sell their products under competitive conditions and the other is quite far away. Both adopt as their production objective the maximization of net returns. How does that decision affect their operations in similar ways? ...in different ways?
  44. (6) "Planning periods" are critical to developers and resource users. Their selection is affected by operators' production objectives and discount rates they choose to apply to future incomes. What are the general effects of each?
  45. (8) What advantages are offered analysts of costs and benefits by considering ratios of incremental benefits to incremental costs?
  46. (6) What are "supersession costs?" Who is affected by them? Which ones are actual losses and which are opportunity costs?
  47. (8) Barlowe describes conservation as "the wise use of resources over time." He then goes on to develop notions of conservation in the context of ordinary production functions. Explain
  48. (10) Write the "land rent" equation commonly used by geographers to assess impacts of production and transportation costs. Define all its terms. Which elements account for the thinking of Ricardo? ...which ones account for Von Thunen? Using the same notation, rewrite the equation in such a manner that an individual operator might recognize his "intensive margin of land use."
  49. (8) The "no-rent margin" is easy to portray graphically when considering the Von Thunen model of agricultural land uses. Prepare a diagram of a no-rent margin situation under conditions appropriate to Ricardo's model. So that I know you know what you're doing, illustrate a different Ricardian situation allowing profits to operators faced with identical market prices.
  50. (6) Mathematically speaking, the "extensive margin of land use" can be expressed in the same way as the "extensive margin of production." Explain.
  51. (6) What's the objective of the equimarginal principle? In what ways does it help operators?
  52. (6) A potential buyer reviews "the books" of a mine operation that is available for purchase to develop a sense of its future income-producing capabilities. How might that information be employed by the seller to arrive at an asking price, and by the potential buyer to prepare an offer? How will the potential buyer's offer differ from the seller's asking price if the buyer intends to maintain current operations, but has used a higher discount rate to estimate the mine's worth? How might the potential buyer's offer differ from the seller's asking price if they apply the same discount rate to future earnings, but after purchasing the mine the buyer intends to accelerate extraction rate by, say, one third with relatively little increase in operating costs?
  53. (6) Consider Murphy's "transition zone" surrounding an expanding Central Business District (CBD) to be the landscape expression of the margin of transference discussed by Barlowe. Under conditions of rapid growth, some developers may commit investments to sites relatively remote from the established CBD (perhaps later finding their efforts were "premature developments", but not necessarily). Justify their decisions employing the notion and properties of Barlowe's "zone of transference".
  54. (10) Consider two operators producing the same thing in the same way with identical factor costs--payments to labor and capital, etc. One is close to the market at which they sell their products under competitive conditions and the other is quite far away. Justify differences in scales of operation that each may select in order to maximize net returns (max(TR-TC)). How might their production intensities differ if both decide to maximize percentage returns (max(TR/TC))? Compare the ranges of profitable operating intensities available to each.
  55. (4) In terms of the "investment strategies" approach to evaluating development options, differentiate between "cut-off periods" and "pay-back periods."
  56. (9) Differentiate between "development-" and "supersession costs" arising from land redevelopment. How do "waiting costs" and "ripening costs" fit into the picture?
  57. (6) How do the most primitive aspects of landscape geometry--distance and area--enter into decisions by competing owners attempting to attract potential renters or buyers to their tracts of land?
  58. (6) Write an equation for calculating the present value of future income expected at one particular time in the future. Write a second equation for calculating the present value of future income expected each year for a particular number of years into the future. Define all terms in both equations.
  59. (8) What production objectives can be identified in the various analyses of the "economic law of diminishing returns" that cannot be recognized in "physical product analysis". What production relatiships indicate that objective? (Hint: TVP = TFC is not one of them.)
  60. (8) Describe the conditions of a "competitive market?" Why has the assumption of a competitive market been critical to developing notions of intensive margins of land use in lecture and textbook discussions?
  61. (10) Define the intensive margin of land use in as many ways as you can. Employ a value-product analysis presentation to diagram how its value can be expected to change with decreasing access to central markets. On the same sketch, show how production intensities vary as a consequence.
  62. (8) Think of benefit-cost analysis as a value-product-like production function. What "project scale" has been achieved when the ratio of marginal project benefits to marginal project costs equals one (1.0)? What scale has been achieved when the ratio of marginal project benefits to marginal project costs equals the ratio of average project benefits to average project costs? ...when the ratio of marginal project benefits to marginal project costs equals zero (0.0)? ...when the ratio of average project benefits to average project costs equals one (1.0)?
  63. (8) The "extensive margin of production" can be defined in eight different ways, two of which are "MVP$=$AVP" and "min AC" Write out the other six definitions using similar terminology. (Limit what you include in your symbolic expressions to selections from among the following terms and mathematical operators: TPP, MPP, APP, TVP, TFC, MVP, MFC, AVP, AFC, TR, TC, MR, MC, AR, AC, max, min, +, -, *, /, =, >, <.) Why are there only two definitions from Physical Product Analysis?
  64. (4) An operator recognizes only one solution to a costly production problem. In deciding whether or not to implement that solution, which of the following investment criteria is the operator likely to employ and why? average annual rate of return; average annual return; pay-back period; cut-off period
  65. (10) Some time ago it was suggested by Prof. W. Isard, an economist and the principal founder or the Regional Science Association, that every production decision also is a location decision. Now, that known contrarian Prof. T.--once again attempting to give primacy to the geographical perspective, suggests that every location decision also is a production decision. In one paragraph justify Prof. T.'s contention. In a second paragraph (and maybe a third) explain how it is that these two statements are not really contradictory, but at the same time are not saying the same thing either.
  66. (8) Differentiate between "use capacity" and "economic capacity." Which of the various production objectives (that is, to operate at the extensive margin of production, ...the intensive margin of production, ...the intensive margin of land use, or ...the extensive margin of land use) satisfies operators attempts to produce at the economic capacities of sites at which they undertake activities? How will operators know they are operating at the economic capacity or their production activity?
  67. (4) The equi-marginal principle suggests that owners of several tracts of land with varying economic capacities should commit investments to operations on them differentially. Explain.
  68. (8) Write a pair of equations for the present value ("PV") of net income from: 1) a single payment expected some time in the future ("FI"), as when owners anticipate selling a grown forest "Y" years after planting it; and 2) a stream of annual payments is expected in the future, as when owners lease a tract of "improved" land to others for a term of "Y" years. When year "Y" rolls around, which owner (the person who owns the forest or the one who owns the leased land) will have to receive the larger payment in that year order to satisfy the expectation of earning, say, an eight percent return on similar totals of initial investments plus annual operating costs? Why?
  69. (15) Prepare a sketch of the relationships among marginal value product, average value product, marginal factor cost and average factor cost. Identify the following key points: 1) the extensive margin of production; 2) the intensive margin of production; 3) the intensive margin of land use; 4 and 5) the limits of the range of profitable operations. Duplicate the sketch without any of the labels. Add a "local cost line" (to be labeled "LC") based on the assumption that the original represents a "market location" and LC depicts the effects of rising transportation costs with increasing distance from markets. Now, identify the above-mentioned margins and range reflecting a "remote location." Which of the comparably labeled elements on the two diagrams are different and how? Which ones are the same?
  70. (10) Differentiate between "development-" and "supersession costs" arising from land redevelopment. What are "waiting-" and "ripening costs," and to which of the above two categories to they belong? Where does "unrecovered capital investment" fit into the picture?
  71. (12) Differentiate between "spatial margin of transference" and "spatial margin of production." How do they differ from the "margin of transference" and "no-rent margin" identified by Barlowe? In what way is Barlowe's presentation of this material more general than Prof. T.'s? How might Prof. T. generalize his diagramatic presentation on the effects of distance from markets on production-intensity decisions to accommodate Barlowe's discussion?
  72. (4) What is a "competitive market?" Do they really exist? Who is (which producers are) most likely to encounter them?
  73. 1 ea. Define or identify in the context of this course--select as needed to bring your "total points attempted" to that specified in the instructions for this examination.

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