Which of the Following Is Not an Assumption That We

question 133

Multiple Choice

Which of the following is not an assumption that we make in analyzing pure competition in the long run?

• A)Firms are free to enter into or exit from a purely competitive market.
• B)We may talk about a "representative" firm by assuming that competitive firms all have identical cost curves.
• C)Firms may increase output by expanding their plant sizes.
• D)Profits are not relevant to firm behavior anymore, because competitive firms earn zero profits in the long run.

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Definitions:

At-The-Money Call

An option contract with an exercise price that is approximately equal to the current price of the underlying asset.

Out-Of-The-Money Call

Refers to a call option where the strike price is higher than the market price of the underlying asset.

Treynor-Black Model

A portfolio optimization model that blends active and passive investments to optimize risk-adjusted returns.

Alpha Coefficient

A measure of the performance on a risk-adjusted basis, identifying the excess return of an investment relative to the return of a benchmark index.