Question

In: Economics

Choose only 3 benefits of land being occupied by firms according to the principle of highest...

Choose only 3 benefits of land being occupied by firms according to the principle of highest and best use (note that most of the options listed below do not arise from highest and best use):

a. Establishment of a working wage

b. Separation of industrial toxins from residential areas

c. Expanding tax base

d. Increased number of jobs

e. Vitality of locally owned businesses

f. Agglomeration

g. Improved community health

h. Greater potential for philanthropy

i. More complex division of labor

j. Situs

k. Balance of corporate businesses with smaller shops

Solutions

Expert Solution

The highest and best use is determined based on the four criterias -

  1. Physically Possible
  2. Legally Permissible
  3. Financially Feasible
  4. Maximally Productive

The benefits can be determined based on the application of the above criterions -

c. Expanding tax base - Tax base refers to the amount of assets and income that can be taxed. When the firm owning the land is legally permisable. then an expansion of tax base will occur. The firms owning the land increases its own assets and can generate higher future income for itself and other people it can employ on the land. This can expand the tax base in both present and future.

d. Increased number of jobs - The land owned by the firm will be used for some productive purpose under the maximally productive criterion. Based on the criteria productivity should be maximized. Here maximized productivity is for the use of land. A maximal productive use of land will require more people to work on the land or on the business setup on the land. In any case it will provide increased number of jobs for the locals.

e. Vitality of locally owned businesses - If the land is used at its highest and best use, it can provide vitality to local businesses. The local businesses can provide various inputs for projects that can be set up on the land. This will provide local businesses with strong demand from the productive use of the land. Further increased incomes of people in the region due to maximal productive use of the land will increase income of the local population creating stronger markets for local businesses.


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