Urban Economics Final Exam

Not all materials from notes. Rather, they are information that would be better learned through repetition. Use as supplement, not main study method.

What are the 2 categories of how the FBI measures crime? Give a description of each.

1. Personal Crime: Victim is in danger

2. Property Crime: Victim is not in danger

What are the problems with FBI data? (3)

1. Only includes crimes reported to the police

2. Lots of less serious crimes get underreported

3. Hierarchical Counting: Only the serious crime gets reported

Who are the victims of crime? (3)

• Low income

• Central Cities

• Blacks as victims of property crime

What are the costs of crime? (2)

• Lost property

• Medical expenses

What are the three reasons why crime increases in big cities?

1. More loot

2. Lower probability of being arrested

3. More female headed households

More loot changes the MB and MC graph, how? (3)

• MB increases

• Q increases

• C increases

Lower probability of arrest changes the MB and MC graph, how? (3)

• MC decreases

• Q increases

• C decreases

More female headed households changes the MB and MC graph, how? (3)

• MC decreases

• Q increases

• C decreases

In 1960 crime rates did what?

In 1960 crime rates began increasing steadily

What did crime experts predict would happen in 1990?

That there would be a “bloodbath” or high crime rates

In 1990 what really happened to crime rates?

Crime rates decreased

In Steve Levitt’s Freakonomics what are the 7 topics we cover?

1. Strong Economy

2. Increased Reliance on Prisons

3. Increased Use of Capital Punishment

4. Innovation Policing Strategies and Increased Number of Police

5. Tougher Gun Laws and Changes in the Drug Market

6. Aging Population

7. Legalization of Abortion

Why is housing different? (name 5 reasons)

• There’s different kinds of housing

• There’s different preferences

• Different needs based on family size

• There’s different budgets for homes

• Moving is costly

What are the two issues with the hedonic pricing technique?

1. Overestimates value of the bedroom (captures more than one effect)

2. Underestimates the value of an additional square foot of land (leaving attributes out)

Explain each part of the user cost model formula (7)

P_H = R / i + tp + m + d - π

P_H = purchase price of the house

R = rental value

i = interest rate

tp = property tax

m = maintenance

d = depreciation

π = expected inflation

What happens if π decreases?

If π then the denominator increases and the price of the house decreases (depreciates in value)

Why do people live in disequilibrium?

You live in disequilibrium since the gap in utility isn’t large enough to outweigh the large costs associated with moving.

Name the housing policies that changes the supply (supply side) (3)

1. Public Housing

2. Subsidies For Private Housing

3. Low Income Housing Tax Credit

Name the housing policies that changes the demand (demand side) (1)

1. Vouchers

Name the two reasons why the government implement mortgage interest deductions (MID)

1. Internalize a neighborhood externality

2. Promote stable communitie