In Efficient Financial Markets, Unregulated Competitive Bidding Should Bring About

question 4

Multiple Choice

In efficient financial markets, unregulated competitive bidding should bring about the most productive use of an asset and the price paid for that asset should reflect fair value based on its usefulness. In real estate, this is not always the case. For example, there is no substitute for certain pieces of land which gives the owner a bargaining advantage in determining the value of the land. This feature of real estate markets is commonly referred to as:

• A) incomplete information
• B) locational monopoly
• C) positive externality
• D) negative externality

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Definitions:

Negative Linear Relationship

A type of relationship between two variables where one variable increases as the other decreases, and this change is consistent.

Scatter Diagram

A graphical representation where two variables are plotted along two axes, aiming to show their relationship or correlation.

Linear Relationship

A relationship between two variables where a change in one variable is associated with a proportional change in the other, represented graphically by a straight line.

Negative Linear Relationship

A relationship between two variables where one variable increases as the other decreases, indicated by a negative correlation coefficient.