If Long-Run Equilibrium Is Present in a Competitive Market, the Typical

question 147

Multiple Choice

If long-run equilibrium is present in a competitive market, the typical firm in the market will be

• A) making economic losses.
• B) making zero economic profit.
• C) making economic profit.
• D) making a rate of return that is higher than the rate earned in other industries.
• E) both c and d are correct.

Understand the role of the risk-free rate in determining the expected returns according to APT.

Appreciate the importance of factor models in explaining security returns.

Determine the risk premiums on factor portfolios according to multifactor models.

Understand the historical and legal context of consumer protection before the 1960s including "caveat emptor."