Sure, but you can look at the cost of an extra floor in terms of land costs. If a single family home costs an extra 900,000$ from land costs + some constant C, then stacking X of them is worth it until adding one more 1br home costs more than 900,000$ + C. Granted, there is a feedback loops and you need transportation infrastructure etc for taller buildings etc, still I think the market can happily build taller buildings than most expensive city's let them.