In the Long Run, in a Perfectly Competitive Market

question 133

Multiple Choice

In the long run, in a perfectly competitive market:

• A)firms earn zero economic profits.
• B)firms operate at an efficient scale.
• C)supply is perfectly elastic when all firms have the same cost structure.
• D)All of these are correct.

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Definitions:

Basis Risk

The risk that the price of a hedge and the asset being hedged will not move in perfect correlation.

Call Option

A financial arrangement granting the buyer the freedom, but not the duty, to acquire an asset such as a stock, bond, commodity, at a set price within an established timeframe.

Credit Default Swap

A financial derivative that allows an investor to swap or offset credit risk with another party.