For Markets to Be in Equilibrium (That Is, for There $\overline { \mathrm { r } } = \tilde{ \mathrm { r } }$

question 26

Multiple Choice

For markets to be in equilibrium (that is, for there to be no strong pressure for prices to depart from their current levels) ,

• A) The past realized rate of return must be equal to the expected rate of return; that is,
• \(\overline { \mathrm { r } } = \tilde{ \mathrm { r } }\) .
• B) The required rate of return must equal the realized rate of return; that is, r =
• \(\overline { \mathrm { r } }\) .
• C) All companies must pay dividends.
• D) No companies can be in danger of declaring bankruptcy.
• E) The expected rate of return must be equal to the required rate of return; that is,
• \(\tilde { \mathrm { r } }\) = r.

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Definitions:

Economies of Scope

Cost advantages that enterprises obtain due to efficiency improvements gained by producing a wider variety of goods or services.

Joint Cost Function

A cost function that describes the total cost of producing multiple products together, where the costs cannot be separated for each product.

Economies of Scope

Cost advantages that enterprises obtain due to a broad scope of operations or the variety of products and services offered.

Cost Function

A mathematical relation that describes how the total cost of producing a good or service varies with the level of output.