If Markets Are in Equilibrium, Which of the Following Conditions

question 106

Multiple Choice

If markets are in equilibrium, which of the following conditions will exist?

• A) Each stock's expected return should equal its required return as seen by the marginal investor.
• B) All stocks should have the same expected return as seen by the marginal investor.
• C) The expected and required returns on stocks and bonds should be equal.
• D) All stocks should have the same realized return during the coming year.
• E) Each stock's expected return should equal its realized return as seen by the marginal investor.

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Definitions:

Profits Maximization

The process or strategy employed by a business to increase its net earnings and achieve the highest level of profit possible.

Price Received

The amount of money paid to a producer or seller for a product or service.

Production Function

A mathematical model describing the relationship between input factors (like labor and capital) and output, indicating how much can be produced with given resources.

Supply Function

A mathematical relation showing the quantity of a good that producers are willing and able to sell at different prices, holding other factors constant.