Most Supermarkets Charge the Same Price for the Majority of Goods

question 34

Multiple Choice

Most supermarkets charge the same price for the majority of goods sold.This suggest that

• A)the government regulates prices of most products sold in supermarkets.
• B)supermarkets have colluded to fix prices on most of the goods sold.
• C)mark-ups reflect the degree of competition in the supermarket industry.
• D)the large supermarket chains are price leaders and smaller grocers take these prices as given.

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Definitions:

Security Market Line

A representation in financial markets of the relationship between risk and expected return, used in the Capital Asset Pricing Model.

Overpriced Security

A security trading at a price believed to be higher than its theoretical value or intrinsic worth.

Expected Market Rate

The anticipated rate of return on an investment as predicted by investors based on historical market data and trends.

Abnormal Return

Return on a stock beyond what would be predicted by market movements alone. Cumulative abnormal return (CAR) is the total abnormal return for the period surrounding an announcement or the release of information.