The following graph shows the high-income households’ and low-income households’
ID: 1115265 • Letter: T
Question
The following graph shows the high-income households’ and low-income households’ 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 statements is true? (5 pts)
(a) Because there are more high-income households than low-income households, highincome households outbid low-income household.
(b) This is a stable equilibrium.
(c) Low-income households will outbid high-income households, in the equilibrium there will be fewer than 75 high-income households.
(d) The stable equilibrium is a perfectly integrated neighborhood with equal numbers of high-income households and low-income households.
Premium (low income) Premium (high income) 24 50 65 70 75 100 High income households in neighborhood AExplanation / Answer
A) Because there are more high-income households than low-income households, high-income households outbid low-income household.
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