If the Actual Price Were Below the Equilibrium Price in the Market

question 78

Multiple Choice

If the actual price were below the equilibrium price in the market for bread, a:

• A) surplus would develop that cannot be eliminated over time.
• B) shortage would develop, which market forces would eliminate over time.
• C) surplus would develop, which market forces would eliminate over time.
• D) shortage would develop, which market forces would tend to exacerbate.

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Definitions:

Expected Rate of Return

The projected percentage return on an investment over a given period, factoring in all known variables.

Beta

A measurement of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Capital Market Line

A theoretical line representing the risk versus return of the market of all investable assets, assuming risk-free borrowing and lending rates.

Security Market Line

A representation of the capital asset pricing model which shows the relationship between risk (as measured by beta) and expected return of investments.