Which principle explains why larger land parcels tend to sell for less per acre than smaller parcels?

Which principle explains why larger land parcels tend to sell for less per acre than smaller parcels?

• A. Economies of scale
• B. Supply and demand
• C. Locational advantage
• D. Market cycles

Answer: (A)

Economies of scale explains why larger land parcels tend to sell for less per acre than smaller parcels. When a parcel gets bigger, the market for it becomes more limited—fewer buyers need or want a very large tract, and the extra acres add less incremental value to most buyers. That reduced marginal value means buyers are willing to pay less per acre as the size increases, so the overall per-acre price declines with parcel size. In contrast, while supply and demand drives prices in general, it doesn’t specifically account for the size-related drop in per-acre value. Locational advantage focuses on where the land is, not how big it is, and market cycles describe timing effects rather than a structural size effect.

Economies of scale explains why larger land parcels tend to sell for less per acre than smaller parcels. When a parcel gets bigger, the market for it becomes more limited—fewer buyers need or want a very large tract, and the extra acres add less incremental value to most buyers. That reduced marginal value means buyers are willing to pay less per acre as the size increases, so the overall per-acre price declines with parcel size. In contrast, while supply and demand drives prices in general, it doesn’t specifically account for the size-related drop in per-acre value. Locational advantage focuses on where the land is, not how big it is, and market cycles describe timing effects rather than a structural size effect.