The Basic Distinction Between a Primary and a Secondary Market

question 48

Multiple Choice

The basic distinction between a primary and a secondary market is

• A) proceeds from sales in the primary market go to the current owner of a security; proceeds in secondary market go to the original owner.
• B) primary markets involve direct dealings within regional exchanges.
• C) only new securities are sold in the primary market; only outstanding securities are bought and sold in the secondary market.
• D) primary markets deal exclusively in bonds; secondary markets deal primarily in common stock.
• E) None of the above.

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Definitions:

Price Elasticity

The measure of how responsive the quantity demanded or supplied of a good or service is to a change in its price.

Substitutes

Goods or services that can be used in place of each other, where the use of one increases the likelihood of the use of the other decreasing.

Price-Elastic

A characteristic of goods or services for which their demand or supply significantly changes with small changes in price.

Mass Transit

Public transportation systems designed to move large numbers of people efficiently via buses, trains, subways, and other modes of transport.