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24 Jan 2025, 03:14
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Under the zoning laws of Metropolitan City, property developers are allowed to build residential high-rises with no height restrictions, allowing them to maximize the number of units per building. As developers rent individual units, the more units in a building, the more profitable it is. However, due to growing concerns about cityscape aesthetics and sunlight blockage, it seems inevitable that the city council will soon impose height restrictions on new buildings, limiting them to a percentage of the height of existing buildings in their vicinity.
Suppose a property developer in Metropolitan City wishes to minimize the impact on the profitability of future projects due to the anticipated height restrictions. If the developer could do any of the following and wants to select the most effective course of action, which should the developer do now?
A. Plan to demolish older, shorter buildings in their portfolio if the restrictions take effect.
B. Secure long-term construction contracts at fixed costs for materials and labor.
C. Invest in building technologies that allow for faster construction of high-rises.
D. Develop several taller buildings in areas currently without height restrictions.
E. Collaborate with other developers to lobby against the imposition of height restrictions.
Suppose a property developer in Metropolitan City wishes to minimize the impact on the profitability of future projects due to the anticipated height restrictions. If the developer could do any of the following and wants to select the most effective course of action, which should the developer do now?
A. Plan to demolish older, shorter buildings in their portfolio if the restrictions take effect.
B. Secure long-term construction contracts at fixed costs for materials and labor.
C. Invest in building technologies that allow for faster construction of high-rises.
D. Develop several taller buildings in areas currently without height restrictions.
E. Collaborate with other developers to lobby against the imposition of height restrictions.
24 Jan 2025, 03:14
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Official Solution:
Under the zoning laws of Metropolitan City, property developers are allowed to build residential high-rises with no height restrictions, allowing them to maximize the number of units per building. As developers rent individual units, the more units in a building, the more profitable it is. However, due to growing concerns about cityscape aesthetics and sunlight blockage, it seems inevitable that the city council will soon impose height restrictions on new buildings, limiting them to a percentage of the height of existing buildings in their vicinity.
Suppose a property developer in Metropolitan City wishes to minimize the impact on the profitability of future projects due to the anticipated height restrictions. If the developer could do any of the following and wants to select the most effective course of action, which should the developer do now?
A. Plan to demolish older, shorter buildings in their portfolio if the restrictions take effect.
B. Secure long-term construction contracts at fixed costs for materials and labor.
C. Invest in building technologies that allow for faster construction of high-rises.
D. Develop several taller buildings in areas currently without height restrictions.
E. Collaborate with other developers to lobby against the imposition of height restrictions.
(A) Incorrect. This option might seem strategic but demolishing your own buildings would be a very drastic move, especially if they are profitable. We are not sure how this would help (e.g. if there lots of other short buildings or if these are profitable) but it is questionable at best.
(B) Incorrect. This option is irrelevant. Securing fixed costs could hedge against price increases but the builder could do that at any time, even without the looming regulations. However, while this will reduce costs (possibly), this will not improve profitability from the stand point of height restrictions.
(C) Incorrect. This option is also irrelevant. Faster construction does not influence how tall the buildings can be under new regulations, and again, the builder could have done this without the new regulations looming. There is no connection between the two.
(D) Correct Answer. This is the most effective strategy. By maximizing building heights now, the developer secures a future advantage by ensuring that even a percentage reduction applied to these buildings will allow taller constructions than if starting with shorter buildings.
(E) Incorrect. This could pay off if lobbying is effective but it is not guaranteed. The developer may as well buy lottery tickets. From the standpoint of effectiveness, it is hard to evaluate its impact on profitability and in situations where there is quite a bit of uncertainty, GMAT questions usually shy away from additional assumptions, and so we will leave this question as incomplete and incorrect as stated.
Answer: D
Under the zoning laws of Metropolitan City, property developers are allowed to build residential high-rises with no height restrictions, allowing them to maximize the number of units per building. As developers rent individual units, the more units in a building, the more profitable it is. However, due to growing concerns about cityscape aesthetics and sunlight blockage, it seems inevitable that the city council will soon impose height restrictions on new buildings, limiting them to a percentage of the height of existing buildings in their vicinity.
Suppose a property developer in Metropolitan City wishes to minimize the impact on the profitability of future projects due to the anticipated height restrictions. If the developer could do any of the following and wants to select the most effective course of action, which should the developer do now?
A. Plan to demolish older, shorter buildings in their portfolio if the restrictions take effect.
B. Secure long-term construction contracts at fixed costs for materials and labor.
C. Invest in building technologies that allow for faster construction of high-rises.
D. Develop several taller buildings in areas currently without height restrictions.
E. Collaborate with other developers to lobby against the imposition of height restrictions.
(A) Incorrect. This option might seem strategic but demolishing your own buildings would be a very drastic move, especially if they are profitable. We are not sure how this would help (e.g. if there lots of other short buildings or if these are profitable) but it is questionable at best.
(B) Incorrect. This option is irrelevant. Securing fixed costs could hedge against price increases but the builder could do that at any time, even without the looming regulations. However, while this will reduce costs (possibly), this will not improve profitability from the stand point of height restrictions.
(C) Incorrect. This option is also irrelevant. Faster construction does not influence how tall the buildings can be under new regulations, and again, the builder could have done this without the new regulations looming. There is no connection between the two.
(D) Correct Answer. This is the most effective strategy. By maximizing building heights now, the developer secures a future advantage by ensuring that even a percentage reduction applied to these buildings will allow taller constructions than if starting with shorter buildings.
(E) Incorrect. This could pay off if lobbying is effective but it is not guaranteed. The developer may as well buy lottery tickets. From the standpoint of effectiveness, it is hard to evaluate its impact on profitability and in situations where there is quite a bit of uncertainty, GMAT questions usually shy away from additional assumptions, and so we will leave this question as incomplete and incorrect as stated.
Answer: D
01 Apr 2025, 14:27
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Bunuel I am confused between C and D and was inclining towards C because the faster technology to build the high rise building would help get 1 highest building built asap before the council passes the law for restrictions on height. The highest building would serve as the measuring threshold for shorter buildings.
In D it says "several" buildings, building which could take good amount of time as there are more than 2 buildings to be built and if council proposes the law to restrict in between building these buildings then the plan doesnt work.
Probability of winning while getting 1 highest building built with faster tech is high.
In D it says "several" buildings, building which could take good amount of time as there are more than 2 buildings to be built and if council proposes the law to restrict in between building these buildings then the plan doesnt work.
Probability of winning while getting 1 highest building built with faster tech is high.
