After a Period of Price Stability in the 1990s, Housing

question 111

Multiple Choice

After a period of price stability in the 1990s, housing prices increased dramatically during 2002-2005 because

• A) regulations designed to make housing more affordable increased the demand for housing and drove housing prices upward.
• B) regulations designed to make housing more affordable decreased the number of sub-prime loans and made home buying a safer investment.
• C) mortgage lending standards tightened, and therefore mortgage loans for housing were only available to buyers purchasing highly expensive homes.
• D) home buyers were putting more money down and requiring more return on their investment, driving housing prices up.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for some degree of market power and price setting.

Monopolistic Competition

An industry structure where several entities sell products that are similar in nature but not completely the same, thus giving them a slight edge in market power.

Differentiate

To recognize or ascertain what makes someone or something unique or distinct, especially in the context of products or services in the marketplace.

Industry Market Structure

The organization of a market based on the number of firms in the market, the nature of competition, and the extent of product differentiation.