The Ratio of the Rental Price of Housing to the Price

question 20

Multiple Choice

The ratio of the rental price of housing to the price of housing is lower than the ratio of the rental price of capital to the price of capital because

• A) houses are so much more expensive than capital.
• B) most housing built in the United States is far less expensive than the typical capital project.
• C) housing depreciates at a much slower rate than physical capital.
• D) the rate of inflation in the price of housing is far greater than the rate of inflation in the price of capital.
• E) the price of capital is set in an imperfectly competitive market, whereas the price of housing is determined by the workings of a nearly competitive market.

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Definitions:

Return on Investment

A financial ratio that calculates the profitability of an investment by dividing the net profit by the initial cost of the investment.

Controllable Margin

The portion of profit or income that a manager can directly influence by controlling costs or increasing sales.

Invested Capital

Funds invested in a company by the shareholders and lenders, used for the purchase of assets and operation of the company, aiming for business growth and profitability.

Expansion Alternatives

Various strategies or methods a company may consider to grow its business operations, such as opening new locations, product diversification, or acquisitions.