Question 1: In the October 26 th , 2011, edition of The Villager, Joanne Routzah

Question

Question 1: In the October 26th, 2011, edition of The Villager, Joanne Routzahn wrote a letter to the editor titled “Extend student rental moratorium.” Ms. Routzahn is referring to a one-year moratorium on student-rental housing in a designated area surrounding the St. Thomas campus. A particular excerpt from her letter:

Macalester-Groveland is known for its stability with houses and families, children and older adults who take pride in their properties. We have respect for our neighbors and do not disfigure houses to make money. Converting small one-story homes into rental properties with absentee landlords does not add value to our neighborhood. It devalues and detracts from not only that house but the houses next door and the neighborhood in general.

a.) What is the specific market (good or service) that this moratorium is aimed at? Who are the “consumers” in this market? Who are the “producers” in this market?

b.)According to Ms. Routzahn, does this market exhibit a positive or negative externality? Briefly explain.   How are the effects of this externality monetized?

c.)Would the private market over or under produce this good / service, relative to the efficient quantity? Briefly explain how you know.

d.) What is a government policy we learned about in class that could correct (“fix”) this problem? Briefly explain how the policy would work.

Question 2: Many large cities have convention centers in their downtowns. (Both St. Paul and Minneapolis have a convention center.) The idea is that organizations will rent out the convention center and bring in a lot of people from around the country (world) to have meetings. Oftentimes city governments help pay to build convention centers. We want to think about this good (convention centers) from the perspective of people (organizations) that consume the good: the organizations that would rent out the center for their conventions.

a.) Thinking about the good/service “a convention center,” is it excludable or non-excludable? Explain.

b.) Thinking about the good/service “a convention center,” is it rival or non-rival? Explain.

c.) Based on your answers in (a) and (b) is the good/service “a convention center” susceptible to a free-rider problem? Clearly explain.

d.) I claim that “convention centers” exhibit an externality. Would it be a positive or negative externality? Explain.

e.) Based on your answers above and using concepts seen in class, why might a city government help pay for a convention center? Clearly explain.

Explanation / Answer

Answer

1) D) They can claim a 6k credit.

According to the IRS The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).?

2) D) 25k

Limited Partner cannot be active

Yes

Issues LIH Credits LIH Rental RE Losses Rehab Credits Other Credits $25,000 offset available? Yes Yes Yes Yes Active participation required No

Limited Partner cannot be active

Yes

No Does not apply Phaseout range Does not apply $100,000 - $150,000 $200,000 - $250,000 Does not apply

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