As a Knowledgeable Investor in 2007, You Should Have Realized

question 179

Multiple Choice

As a knowledgeable investor in 2007, you should have realized that as interest rates fell, bond prices would

• A)also fall.
• B)rise.
• C)become more volatile, like stock prices.
• D)fall but not by as much as stock prices.

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Definitions:

Economic Profit

The variance between collective earnings and complete expenditures, encompassing both overt and covert costs.

Normal Profit

The minimum amount of profit needed for a company to remain competitive in the market; it equals the total opportunity costs of a firm.

Economic Profits

The surplus or profit earned by a firm or individual after accounting for both explicit and implicit costs.

Purely Competitive Industry

An industry characterized by many small firms producing identical products where no single firm can influence the market price.