©BRIGHTSTARS EXAM SOLUTIONS
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Perry Real Estate College - National Practice
Tests 6-10 Exam Questions With Verified
Answers
NATIONAL TEST 6: Economics; Appraisal - answer✔
6.1 If the price of an item is increasing, one can usually assume that
a. demand for the item is decreasing in relation to supply of the item.
b. demand for the item is increasing in relation to supply of the item.
c. supply of the item is increasing.
d. demand for the item and supply of the item are increasing. - answer✔6.1 (b) demand for the
item is increasing in relation to supply of the item.
In a market economy, the primary interactions between supply, demand and price are: if supply
increases relative to demand, price decreases; if supply decreases relative to demand, price
increases; if demand increases relative to supply, price increases; and if demand decreases
relative to supply, price decreases.
6.2 When the market for an item has achieved market equilibrium, which of the following
statements is true?
a. New suppliers will enter the market and drive the price down.
b. Demand will slowly taper off, driving the price down.
c. Unmet demand for the item is directed toward demand for some other item.
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d. Supply and demand are equal, and price and value are equal. - answer✔6.2 (d) Supply and
demand are equal, and price and value are equal.
A market tends toward a state of equilibrium in which supply equals demand, and price, cost,
and value are identical. According to this principle, market demand moves to meet supply, and
supply moves to meet demand. If there is an extreme shortage of an item for which there is
normally a strong demand, suppliers will rush to increase production to close the gap. If
inventories of an item are very high, suppliers will stop production until the oversupply has
been depleted.
6.3 As an economic product, real estate is distinguished by
a. its homogeneity.
b. its variety.
c. the uniqueness of every parcel.
d. its ability to appreciate in value. - answer✔6.3 (c) the uniqueness of every parcel.
In comparison with other economic products and services, real estate has certain unique traits.
Traits of real estate include: inherent product value; uniqueness of every property; demand
must come to the supply; illiquidity; slow to respond to changes; and a decentralized local
market.
6.4 The city of Stevensville has declared a moratorium on new construction. If demand is
increasing, what will be the likely effect on real estate prices in the area?
a. Prices level off.
b. Prices continue to follow the trend that preceded the moratorium.
c. Prices fall.
d. Prices rise. - answer✔6.4 (d) Prices rise.
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If demand is increasing and a moratorium slows supply, demand will begin to outpace supply,
forcing prices to rise as the product becomes scarcer in relation to demand.
6.5 If Okapi, Inc., a company that markets its sports clothing worldwide, moves into Stevensville
and hires 100 employees, it is reasonable to expect that the town will experience
a. an immediate rise in the demand for industrial real estate, but no other changes in the real
estate market.
b. an increase in demand for all types of real estate.
c. a housing boom, but no other changes in the real estate market.
d. an immediate increase in the prices for industrial and office real estate, but no impact on the
residential market. - answer✔6.5 (b) an increase in demand for all types of real estate.
New businesses will arise to support the new company. They will hire new employees, some
from out of town. The new employees will need housing. Hence the demand for residential real
estate, as well as for commercial and industrial, will intensify, and it will also stimulate new
construction.
6.6 What is "absorption?"
a. The amount of new space that is added to available space over a period of time.
b. The number of houses that are built over a period of time.
c. The amount of space that is occupied at any given time.
d. The number of available units that become occupied over a period of time. - answer✔6.6 (d)
The number of available units that become occupied over a period of time.
Absorption is the amount of available property that becomes occupied over a period of time.
6.7 When vacancies are declining in a real estate market, it is common for the market to
experience
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a. rising prices.
b. falling prices.
c. falling construction activity.
d. falling absorption. - answer✔6.7 (a) rising prices.
Within the business cycle of real estate, declining vacancy indicates a combination of increasing
demand which "fills up" supply which in turn decreases. As space becomes scarcer, rents for
available space increase.
6.8 The price for any product is a function of four fundamental determinants of value. These
are
a. durability, feasibility, mobility, and location.
b. desire, utility, scarcity, and purchasing power.
c. popularity, recognizability, promotion, and rebate.
d. fungibility, costs, convenience, and uniqueness. - answer✔6.8 (b) desire, utility, scarcity, and
purchasing power.
The value of something is based on the answers to four questions: how much do I desire it; how
useful is it; how scarce is it; and am I able to pay for it.
6.9 A town is rapidly growing, but all the buildable vacant lots in the most desirable area have
already been occupied. In this case, it is likely that the price of existing homes in that area
a. will stabilize, since the population must stabilize.
b. will increase.
c. will decline, since no further building can take place.
d. will not show any predictable movement. - answer✔6.9 (b) will increase.
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