When Firms Have an Incentive to Exit a Competitive Market

question 29

Multiple Choice

When firms have an incentive to exit a competitive market, their exit will:

• A)necessarily raise the costs of firms that remain in the market
• B)raise profits for firms that remain in the market
• C)lower market price
• D)do all of the above

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Definitions:

Standard Deviation

Standard deviation is a statistical measure of the dispersion or variability of returns for a given security or market index, indicating the degree of risk involved.

Risky Asset

Any asset that has a significant degree of risk associated with its expected returns, including the possibility of losing some or all of the original investment.

Expected Rate of Return

The average amount of profit or loss one can expect on an investment, based on historical data or estimations of future performance.

Variance

A statistical measurement of the spread between numbers in a data set, reflecting their volatility.