Module 11 Quiz

Question 1

Which of the following statements is false regarding market equilibrium?

A) At the point of market equilibrium, price, cost, and market value are all equal.

B) A stable real estate market requires market equilibrium for an extended period.

C) The real estate market rarely, if ever, reaches the point of market equilibrium.

D) Supply and demand both move in a general direction toward market equilibrium.

Answer 1

B) A stable real estate market requires market equilibrium for an extended period.

Question 2

Which principle states that the property with the lowest price attracts the greatest demand and widest distribution when several competing properties are available?

A) contribution
B) increasing and decreasing returns
C) substitution
D) competition

Answer 2

C) substitution

Question 3

Anticipation is the expectation that past benefits will continue unchanged.
True
False

Answer 3

False

Question 4

An owner continues to make improvements to a property to the point where the value is no longer enhanced. What subgroup principle of balance does this illustrate?

A) contribution
B) opportunity cost
C) increasing and decreasing returns
D) surplus productivity

Answer 4

C) increasing and decreasing returns

Question 5

An appraiser is analyzing a site that was previously used as a gas station and located on a busy intersection. The underground tanks had significant leakage during the years it was used as a service station. The facility has
been boarded up for several years and the site is large enough to allow other uses. What test of highest and best use must the appraiser give additional consideration to in this assignment?

A) maximum productivity
B) physically possible
C) legal permissibility
D) financial feasibility

Answer 5

D) financial feasibility

Question 6

Financial feasibility must be determined before considering the physical attributes of the property.
True
False

Answer 6

False

Question 7

A small average residence is in an area of luxury homes. The effect of the surrounding homes on the small residence is called

A) regression.
B) excess profits.
C) progression.
D) conformity.

Answer 7

C) progression.

Question 8

Avery is beginning a highest and best use analysis of a property with existing improvements. What is the first analytical step Avery should perform?

A) an analysis of consistent use
B) a highest and best use analysis of the site as though vacant
C) an analysis of interim use
D) a highest and best use analysis of the property as improved

Answer 8

B) a highest and best use analysis of the site as though vacant

Question 9

A temporary use of a property until a different use becomes maximally productive is

A) conditional use.
B) interim use.
C) nonconforming use.
D) excess use.

Answer 9

B) interim use.

Question 10

Which theory states that land cannot be valued based on one use while the improvements are valued on the basis of another use?

A) interim use
B) value in use
C) consistent use
D) uniform use

Answer 10

C) consistent use

Question 11

Write a number on the line opposite each item below to indicate whether the item is best described as

1. Anticipation
2. Balance
3. Change
4. Competition
5. Conformity
6. Contribution
7. Externalities
8. Increasing and decreasing returns
9. Opportunity cost
10. Substitution
11. Supply and demand
12. Surplus productivity

• Property values tend to be set by the cost of acquiring an equally desirable substitute.
• The cost of options foregone or opportunities not chosen.
• The net income that remains after the costs of the various agents of production have been paid.
• Forces outside a property that may have a positive or negative effect on its value.
• Value is created and sustained when supply and demand are moving toward a state of equilibrium.
• Value is the present worth of future benefits.
• Value is created and sustained when the characteristics of a property harmonize with the surrounding area and are typical in the marketplace.
• The value a particular component adds to the value of the whole property.
• The market is dynamic.

Answer 11

Key:

1. Anticipation
2. Balance
3. Change
4. Competition
5. Conformity
6. Contribution
7. Externalities
8. Increasing and decreasing returns
9. Opportunity cost
10. Substitution
11. Supply and demand
12. Surplus productivity

Answers:
10 Property values tend to be set by the cost of acquiring an equally desirable substitute.

9 The cost of options foregone or opportunities not chosen.

12 The net income that remains after the costs of the various agents of production have been paid.

7 Forces outside a property that may have a positive or negative effect on its value.

2 Value is created and sustained when supply and demand are moving toward a state of equilibrium.

1 Value is the present worth of future benefits.

5 Value is created and sustained when the characteristics of a property harmonize with the surrounding area and are typical in the marketplace.

6 The value a particular component adds to the value of the whole property.

3 The market is dynamic.