What is the principle that states that larger land parcels tend to sell for less per acre than smaller parcels?

• A. Diminishing returns
• B. Supply and demand
• C. Marginal analysis
• D. Economies of scale

Answer: (D)

Economies of scale in land pricing means that as parcel size grows, the price you can command per acre generally falls. The market for very large tracts is smaller and more specialized, so buyers are fewer and discounts on a per-acre basis are common to attract offers. At the same time, the costs or constraints of developing or using a large parcel can be spread over more acres, reducing the incremental value of each additional acre. So, even though the total value may rise with size, the per-acre value tends to decline, which is the phenomenon described.