Which of the Following Outcomes Is Consistent with a Purely

question 245

Multiple Choice

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

• A)Combined consumer and producer surplus will be maximized.
• B)P = MC = lowest AVC.
• C)The minimum willingness to pay equals the maximum acceptable price.
• D)We would expect all of these to occur in the long run in a purely competitive market.

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Definitions:

Variable-Rate Loan

A loan where the interest rate can change, based on an underlying benchmark or index that reflects the cost to the lender of borrowing on the credit markets.

Increases In Interest Rates

A scenario where central banks or financial institutions decide to raise the cost of borrowing money.

Cap

An upper limit set on the amount of money that can be charged or paid in a certain situation, such as interest rates on a loan or fees.

Cross-Hedging

Cross-hedging involves using a hedge to manage risk by investing in a financial instrument that is not directly correlated to the underlying asset but has similar price movements.