Assume in a Competitive Market That Price Is Initially Below

question 293

Multiple Choice

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will

• A) decrease, quantity demanded will decrease, and quantity supplied will increase.
• B) decrease and quantity demanded and quantity supplied will both decrease.
• C) increase, quantity demanded will increase, and quantity supplied will decrease.
• D) increase, quantity demanded will decrease, and quantity supplied will increase.

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Definitions:

Internal Rate

The discount rate at which the net present value of all cash flows from a particular project or investment equals zero, used in evaluating the profitability of investments.

Accept

To agree to take or receive something offered.

Profitability Index

A financial tool used to evaluate the desirability of an investment, calculated by dividing the present value of future cash flows by the initial investment.