Why can price per square foot mislead when comparing two homes of very different sizes?
Correct Answer
A) Larger homes tend to sell for less per square foot
Why this is correct: Price per square foot often decreases with larger homes because fixed components (e.g., kitchen, bathrooms) are spread over more area, making direct comparisons misleading without adjusting for size. Why the other choices are wrong: 'Square footage is measured differently in each state' is not the primary reason for the distortion in this context. 'The measure excludes the value of the site itself' is irrelevant; site value is included in total price. 'Price per square foot cannot be computed for houses' is incorrect; it can be computed but may mislead. Exam tip: Larger homes typically have lower price per square foot; compare similar-sized properties.
Why This Is the Correct Answer
Why this is correct: Price per square foot often decreases with larger homes because fixed components (e.g., kitchen, bathrooms) are spread over more area, making direct comparisons misleading without adjusting for size. Why the other choices are wrong: 'Square footage is measured differently in each state' is not the primary reason for the distortion in this context. 'The measure excludes the value of the site itself' is irrelevant; site value is included in total price. 'Price per square foot cannot be computed for houses' is incorrect; it can be computed but may mislead. Exam tip: Larger homes typically have lower price per square foot; compare similar-sized properties.
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