A Firm in a Competitive Market Has the Following Cost

question 147

Multiple Choice

A firm in a competitive market has the following cost structure:

If the market price is $4,this firm will

• A) produce two units in the short run and exit in the long run.
• B) produce three units in the short run and exit in the long run.
• C) produce four units in the short run and exit in the long run.
• D) shut down in the short run and exit in the long run.

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Definitions:

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates that the stock is more volatile than the market.

Market Risk Premium

It is the extra return investors expect from holding a risky market portfolio instead of risk-free assets.

Required Rates Of Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put money into a particular project or investment.

Beta

Beta measures the tendency of a security's returns to respond to swings in the market, providing insight into its relative risk.