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:

Discount

The reduction applied to the nominal or face value of something, typically used in the context of bonds or selling goods and services at below their listed prices.

Coupon Bond

A bond that pays the holder a fixed interest rate (the coupon) periodically until maturity, at which point the principal and final interest payment are made.

Par Value

Par value is the face value of a bond or stock as stated by the issuing company, which does not necessarily reflect its market value.