If Equilibrium Exists

question 114

Multiple Choice

If equilibrium exists:

• A)all individuals must have an equal amount of income.
• B)the price in that market will not fluctuate by more than 5%.
• C)there will be no remaining opportunities for individuals to make themselves better off.
• D)the number of buyers will equal the number of sellers.

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Definitions:

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the income or capital gain from the assets will exceed the cost of borrowing.

WACC

Weighted Average Cost of Capital; a calculation that reflects the cost of a company's financing (debt and equity) weighted by the proportion of each financing source in the overall capital structure.

Tax Shields

Deductions and credits available to taxpayers that lower the total tax liability by reducing taxable income.

Equity Risk

The risk of loss arising from fluctuations in the values of equity investments.