The following graph shows the high-income households’ and low-income house- hold
ID: 1114108 • Letter: T
Question
The following graph shows the high-income households’ and low-income house- holds’ willingness to pay for the premium gap to live in the neighborhood, at a given the income composition. Suppose at the moment there are 75 high-income households in the neighborhood. Which of the following statement is true.
(a) Because there are more high-income households than low-income households, high-income households outbid low-income households.
(b) This is a stable equilibrium.
(c) Low-income households will outbid high-income households, in the equlibrium there will be fewer than 75 high-income households. 03/09/11 11:53 AM
(d) The stable equilibrium is a perfectly integrated neighborhood with equal numbers of high-income households and low-income households.
A city of 200 residents has 100 black residents and 100 white residents. It is divided into two equal-sized neighborhoods. Neighborhood A has 90 white residents and 10 black residents, neighborhood B has 10 white residents and 90 black residents. Now suppose 10 white residents from neighborhood A and 10 black residents from neighborhood B leave the city. Which of the following statements is true about the city’s dis-similarity index.
(a) The dis-similarity index becomes larger.
(b) The dis-similarity index becomes smaller.
(c) The dis-similarity index does not change.
(d) The change of dis-similarity index cannot be determined without knowing the destina- tions of these residents.
Which of the following statements is not true about the neighborhood effect?
(a) Theneighborhoodwhereachildgrowsupinhaslargeeffectsonthechildwhenhe/she grows up.
(b) These effects differ dramatically across different neighborhoods.
(c) Tiebout model is one plausible explanation for neighborhood effects.
(d) Neighborhood effects can be accounted for by demographics of the residents.
Premium (low income) Premium (high income) 24 50 65 70 75 100 High income households in neighborhood AExplanation / Answer
First question is answered below
1.
Correct option: (c)
Reason: At 75 high income households, point g representing low income household premiums outbids point f representing high income house premiums.
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