Assume the Market Depicted in the Graph Is in Equilibrium

question 20

Multiple Choice

Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true?
I. Some producers will gain surplus.
II. All consumers will lose surplus.
III. Total surplus may increase or decrease.

• A)III only
• B)I and III only
• C)I and II only
• D)I, II, and III

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Definitions:

Four-Factor Model

An investment model that extends the three-factor model by adding momentum as a factor to account for stock performance.

Excess Returns

The return on an investment beyond the return expected from the risk level, often compared to benchmarks or risk-free returns.

Fama and French

A model developed by Eugene Fama and Kenneth French that expands on the Capital Asset Pricing Model (CAPM) by adding size risk and value risk factors to the market risk factor.

Technical Analysis

A technique for appraising securities through the study of market-generated statistics, like previous prices and transaction volumes.