Which Assumption(s) Is (Are) Necessary for an Efficient Allocation of Resources

question 173

Multiple Choice

Which assumption(s) is (are) necessary for an efficient allocation of resources among firms?

• A) Factor markets are open and competitive.
• B) All firms pay the same prices for inputs.
• C) Firms behave so as to maximize their profits.
• D) All of the above are correct.

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Definitions:

Annual Coupon Bonds

Bonds that pay interest to the bondholder yearly until maturity, at which point the face value is also repaid.

Yield To Maturity

The expected total yield from a bond when held until its maturity date.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to interest rate changes, representing the weighted average time until all cash flows are received.

Yield-To-Maturity

The expected total yield on a bond when held to its maturity date, stated as a yearly percentage.