*Preliminary Information

Floor Area Ratio (FAR)

1) P = -FOptimizing FAR

= Price for all housing and location factors besides FAR

F = FAR

= marginal impact of FAR on Price per square foot.

2). C = + F

= "baseline" cost of "stick" SFU construction

= marginal impact of FAR on cost per square foot

Profit Function:

Profit Function = P*F - C

Profit Function = F - F2 - ( + F)

Profit Function = F - F2 - - F

*Current Question Information:

Assume:

a)Researchers estimated a hedonic regression for Boston Back Bay Condominiums.

Given:

a)The estimated rent function is R = 222-1.48F.

b)Here R shows the price or the value of 1 acre of 1-story brownstones (in million

dollars).

c)The cost function for these building is given as C=100+2F.

d)F is in acre and 1 acre =43560 square feet.

Given:

Values of , , and

= 222

= 1.48

= 100

= 2

Question:

According to these estimated equations what should be the optimum values of F* and p*?