The Capitalization Effect

question 15

Multiple Choice

The capitalization effect:

• A)Is one of the major factors leading to housing bubbles
• B)Has no impact on housing prices
• C)Relates the quality of public services that individuals receive relative to the taxes that are paid for the services
• D)Relates the interest rate on mortgage loans to the value of residential real estate

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Definitions:

Producing Firm

An entity or company involved in the creation of goods or services to be offered to consumers.

Decision Makers

Individuals or groups responsible for making choices that determine the course of actions to be followed.

Efficient

The property of resource allocation where it is impossible to make any one individual better off without making at least one individual worse off.

Marginal Benefit

Marginal benefit is the additional satisfaction or utility that a consumer receives from consuming one more unit of a good or service.