Question

A new faculty member at the local university pays $1,500 per month to rent an apartment in the downtown area. She teaches on campus three days a week and works from home the remaining two days. On the days when she must commute, given the heavy traffic congestion, it takes her two hours each way to commute from downtown to campus. According to the assumptions of the bid-rent model, what should this professor be willing to pay in rent per month to live near campus if her hourly wage rate is $25? (In your calculations, assume there are four weeks in a given month.) $2,100 $2,700 $1,500 $1,200

Answer 1

Answer:

The correct answer is B.

Explanation:

Giving the following information:

A new faculty member at the local university pays $1,500 per month to rent an apartment in the downtown area. She teaches on campus three days a week and works from home for the remaining two days. On the days when she must commute, given the heavy traffic congestion, it takes her two hours each way to commute from downtown to campus.

To calculate how much is she willing to pay we need to take into account the rent she pays now and the cost of transportation she suffers from living far.

Rent= 1,500

Transportation= (25*4 hors)* 3 times a week= 300 a week

Rent in campus= 1500 + (300*4)= $2,700