Real Estate Economics – 5th Edition - by Huber, Messick, and Pivar
Final Exam A
Copyright January 2011, Educational Textbook Company
1. Leverage is:
a. not allowed in the U.S.
b. using other people’s money.
c. using your own money.
d. none of the above.
2. At an online auction of a waterfront site, the purchaser was a yacht sales firm. This is an example of the principle of:
a. change.
b. substitution.
c. first choice.
d. competition.
3. A buyer refused to pay more for a property than an equally desirable alternative property could be purchased for. This is an example of the principle of:
a. substitution.
b. competition.
c. first choice.
d. change.
4. The fact that housing tends to pass to lower economic groups is known as:
a. diminishing returns.
b. filtering down.
c. economics of scale.
d. the multiplier effect.
5. Unit prices go down when constructing multiple units versus a single unit. This is known as:
a. leverage.
b. filtering down.
c. diminishing returns.
d. economies of scale.
6. Prices are increasing for homes, but construction costs and land costs have remained steady. This increase in home prices would be:
a. leverage.
b. stagflation.
c. cost-push inflation.
d. demand-pull inflation.
7. In a deflationary period:
a. prices increase during a recession.
b. demand exceeds supply.
c. there are more goods than purchasing power.
d. the dollar buys fewer goods than before.
8. The best example of inelastic demand would be:
a. housing.
b. table salt.
c. raw land.
d. residential lots.
9. When supply equals demand, it is known as:
a. stagflation.
b. recession.
c. equilibrium.
d. elasticity.
10. The U.S. economic system could best be described as:
a. pure capitalism.
b. a command economy.
c. socialism.
d. mixed capitalism.
11. Which of the following is the fuel of capitalism?
a. Land
b. Profit
c. Labor
d. Capital
12. Reasons for an imperfect real estate market include all, except:
a. imperfect knowledge.
b. production time for new units.
c. must sell and will sell sellers.
d. a homogeneous product.
13. An example of a command economy would be:
a. Great Britain.
b. Cuba.
c. the United States.
d. Australia.
14. The Internet, including social networking sites like Facebook, has helped the real estate marketplace by:
a. maintaining the highest and best use.
b. raising prices.
c. informing buyers and sellers.
d. changing values.
15. Lagging economic indicators tell us:
a. what to expect in the future.
b. why something will be happening.
c. when something will happen.
d. why changes are occurring or have occurred.
16. Our supply of money and credit is controlled by:
a. the World Bank.
b. the President.
c. Congress.
d. the Federal Reserve.
17. An expansionary monetary policy of the Federal Reserve would be to:
a. reduce reserve requirements.
b. reduce the Federal Reserve discount rate.
c. buy government bonds.
d. all of the above.
18. If the U.S. decreased its national debt, the results should be:
a. lower taxes.
b. lower interest rates.
c. equilibrium.
d. more money available for the mortgage market.
19. A loan that meets Fannie Mae purchase guidelines would be a:
a. construction loan.
b. nonresidential loan.
c. conforming loan.
d. jumbo loan.
20. A lender wants to delay selling its inventory of mortgages because it expects:
a. interest rates to drop.
b. points to drop.
c. that the Federal Reserve will raise reserve requirements.
d. the discount rate to rise.
21. A point is equal to:
a. 5 percent of the loan amount.
b. 1 percent of the loan amount.
c. 2 percent of the loan amount.
d. none of the above.
22. Lenders realize that the lower the down payment, the:
a. lower the interest rate.
b. lower the points.
c. greater the risk.
d. easier a loan is to resell.
23. People moving back to the central city are most likely to be:
a. families with children.
b. affluent members of minority groups.
c. retirees.
d. younger professional singles and couples.
24. A city that was formed because of its harbor was:
a. San Francisco, California.
b. Pittsburgh, Pennsylvania.
c. St. Louis, Missouri.
d. Dallas, Texas.
25. Which of the following cities was formed by federal government decree?
a. Seattle, Washington
b. St. Louis, Missouri
c. Washington, D.C.
d. Chicago, Illinois
26. The names Von Thunen, Burgess, Babcock, and Hoyt are associated with:
a. architectural design.
b. fiscal policy.
c. monetary theory.
d. city growth patterns.
27. A city where development resembles a pie chart would be an example of growth according to the:
a. multiple nuclei theory.
b. sector theory.
c. concentric circle theory.
d. axial growth theory.
28. A neighborhood would be defined as:
a. a political separation.
b. an area no more than ¼ mile square.
c. an area of social conformity.
d. one city block.
29. The majority of Americans live in:
a. agricultural areas.
b. unincorporated villages and towns.
c. other urban places.
d. cities and suburbs.
30. The continuous outward growth of a metropolitan area is known as:
a. smart growth.
b. sprawl.
c. redevelopment.
d. progress.
31. Which group of citizens places the greatest reliance on public transportation?
a. Two-parent households
b. Single adults
c. Working mothers
d. The poor
32. When an industry leaves a city, those most likely to remain are:
a. owners and executives.
b. highly skilled workers.
c. unskilled lower-income workers.
d. white collar employees.
33. There seems to be a direct relationship between unemployment and:
a. crime.
b. gentrification.
c. sprawl.
d. redevelopment.
34. An area where soil is contaminated would be referred to as:
a. dirty.
b. a brownfield.
c. a greenbelt.
d. blue land.
35. Which of the following is NOT a way to address physical problems?
a. Clearance
b. Correction
c. Conservation
d. Conformity
36. Employers often contribute to traffic congestion problems by providing:
a. free employee parking.
b. an off-peak hour work week.
c. flextime schedules.
d. a trip reduction program.
37. A housing plan financed by a consortium of African-American churches was called:
a. Christmas in Action.
b. The Nehemiah Plan.
c. Urban Homesteading.
d. Habitat For Humanity.
38. The benefits of light rail transportation include:
a. the willingness of drivers to switch to light rail.
b. the theoretical ability to move many people.
c. that revenues more than pay operational costs.
d. the low initial cost.
39. Sprawl can be controlled by:
a. annexation.
b. larger lots.
c. smart growth.
d. leap frog development.
40. What is the best way to reduce crime?
a. Severe penalties
b. Police presence in high-crime area
c. Local involvement
d. Provide jobs in high-crime areas
41. Private development is successful because:
a. of low-interest government loans.
b. there are few subsidies for redevelopment.
c. it does a better job.
d. it is motivated by profit.
42. Suburban development in the 19th Century owed much of its growth to the:
a. Internet.
b. railroads.
c. African-American movement to the cities.
d. automobile.
43. Suburban areas of greatest growth have a number of factors in common, including:
a. a limited amount of developable land.
b. the local political climate is friendly to development.
c. they are not connected to major transportation arteries.
d. none of the above.
44. The benefits of septic tanks include all, except that:
a. they are extremely environmentally safe.
b. they allow for leap frog development.
c. they allow for growth beyond city utilities.
d. none of the above.
45. Most suburban shopping is based on:
a. pedestrian trips.
b. the automobile.
c. public transportation.
d. the bicycle.
46. A combination or series of cities that have joined together to form an extremely large urban is called a(n):
a. suburbia.
b. superopolis.
c.urbanopolis.
d. megalopolis.
47. Rent control can be expected to result in all of the following, except:
a. poorer maintenance of rental units.
b. fewer newer units being built.
c. greater filtering down of housing.
d. reduction in city services.
48. If a group of brokers agreed that they would not take a listing of less than a particular rate of commission, it would be:
a. legal.
b. legal if the commission rate was more than 5%.
c. a violation of the Sherman Antitrust Act.
d. none of the above.
49. Assuming a taxpayer is in the top tax bracket, the capital gains rate for real estate held for more than one year, but less than five years, is:
a. 20%.
b. 12%.
c. 15%.
d. 28%.
50. For tax purposes, an owner can depreciate:
a. a personal residence.
b. undeveloped land.
c. using a 15-year straight-line schedule.
d. commercial buildings.
51. The Revenue Reconciliation Act of 1993 increased nonresidential property depreciation to:
a. 27 years.
b. 50 years.
c. 23 years.
d. 39 years.
52. “Starker” is a name associated with:
a. the homeowner sales exemption.
b. installment sales.
c. tax-deferred delayed exchanges.
d. Section 8 housing.
53. For a valid tax-deferred delayed exchange, the entire transaction must be completed within:
a. 180 days of the sale.
b. 90 days of the sale.
c. 60 days of the sale.
d. 45 days of the sale .
54. An advantage an owner would have in renting substandard housing units to illegal aliens would be that:
a. illegal aliens seldom complain to authorities about housing conditions.
b. they take better care of the units than U.S. citizens.
c. units rented to illegals would have fewer occupants.
d. rent will always be paid.
55. Who is more likely to purchase homes with two or fewer bedrooms?
a. Recent immigrants
b. Repeat buyers
c. Minority group buyers
d. First time homebuyers
56. Some buyers look for homes in need of work. These homes are referred to as:
a. Section 8 housing.
b. category D housing.
c. cream puffs.
d. fixer-uppers.
57. With regard to housing, Schwabe’s Law states that:
a. blue collar workers spend more for housing than similar income white collar workers.
b. lower educated people spend more for housing than higher-educated people with similar incomes.
c. people with higher incomes pay a lower percentage of their income for housing than do people having a low income.
d. housing costs should never exceed 20 percent of a family’s income.
58. Very few single-bath homes are being built because:
a. buyers demand more than one bath.
b. it is as cheap to build two baths as one bath.
c. of health codes.
d. it reduces energy costs.
59. Higher land costs have led to:
a. fewer new homes being built.
b. larger homes.
c. smaller lot sizes.
d. more amenities in homes.
60. In contemplating auctioning homes, a homebuilder would consider:
a. the ability to quickly liquidate developments after the initial sales momentum has worn off.
b. the longer marketing time of an auction.
c. likely higher prices for an auction.
d. none of the above.
61. The term “manufactured homes” refers to:
a. stick-built homes.
b. precut homes.
c. poorly built homes.
d. homes built in a factory to the HUD Building Code.
62. Which of the following is not an advantage of manufactured housing?
a. No weather delays—homes are built in a factory
b. Homes are generally built in a few days
c. Workers’ time is used more efficiently
d. Insurance costs are as much as for conventionally built housing
63. ADUs relate to:
a. housing for the handicapped.
b. group homes.
c. home sharing.
d. granny flats.
64. A home built in a factory (not necessarily to HUD Code) and transported on trucks to a site would be a:
a. stick-built home.
b. shell home.
c. modular home.
d. none of the above.
65. Which of the following is true as to accessory dwelling units?
a. They promote sprawl
b. They can be built for less than if land had to be purchased
c. They can generally be built without a zoning change
d. None of the above
66. A home was site built without interior drywall, insulation, plumbing or electricity, although the exterior was finished. This would be regarded as:
a. a shell home.
b. a manufactured home.
c. a modular home.
d. prefabrication.
67. Loft conversion makes sense to developers because:
a. financing at excellent terms is readily available.
b. obtaining permits is relatively easy.
c. they generally are in quality suburban areas.
d. they can be built for less than conventional units.
68. An owner of a commercial building who is thinking of adding a second floor for apartments should be aware that:
a. rear stairways or fire escapes may be required.
b. low interest loan money is readily available for this purpose.
c. planning commissions usually welcome these additions.
d. none of the above.
69. A farm can be defined as an enterprise having agricultural income of:
a. $5,000 or more.
b. $3,000 or more.
c. $1,000 or more.
d. none of the above.
70. The growing tendency in agribusiness has been to:
a. smaller farms.
b. large corporate farms.
c. diversified crop farms.
d. family farming.
71. Family farms are inefficient economic units because:
a. of inadequate available labor.
b. of fertility problems.
c. family size has been declining.
d. the supply of both land and labor are fixed factors.
72. To overcome high land costs, farmers have gone to:
a. cattle grazing.
b. wheat production.
c. fruits and vegetables.
d. alfalfa.
73. Of the following, which would generally have the highest land value per acre?
a. Fruits and nuts
b. Vegetables
c. Wheat
d. Corn
74. The land most likely to be taken out of production is marginal land that is:
a. mortgaged.
b. rented.
c. farmer owned.
d. none of the above.
75. During inflationary periods:
a. there are no good investments.
b. investors seek investments with lower capitalization rates.
c. all real estate tends to increase in value.
d. none of the above.
76. An economic downturn would have the greatest negative effect on the value of: