When Plasma Television Sets Were First Introduced Prices Were High

question 267

Multiple Choice

When plasma television sets were first introduced prices were high and few firms were in the market.Later, economic profits attracted new firms and the price of plasma televisions fell.This example illustrates

• A)a decreasing-cost industry.
• B)that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost.
• C)an industry with a low minimum efficient scale.
• D)how fickle consumer demands are.

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Definitions:

Price Sensitive

Characteristic of information or news that could influence the price of securities if it were made public.

Zero-Coupon Bond

A type of bond that does not pay interest during its life but is sold at a discount from its face value and redeemed at par at maturity.

Immunization Strategies

Financial strategies used to shield a bond portfolio from the effects of interest rate fluctuations by balancing the duration of assets and liabilities.

Interest Rate Sensitivity

The degree to which the value of an investment, particularly fixed-income securities, changes in response to variations in interest rates.