When a Perfectly Competitive,well-Functioning Market Is Not in Equilibrium

question 104

Multiple Choice

When a perfectly competitive,well-functioning market is not in equilibrium:

• A) total surplus can be increased by a change in market price.
• B) the market is not efficient.
• C) there are exchanges that can make some better off without someone becoming worse off.
• D) All of these are true.

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Definitions:

Nominal Interest Rate

The interest rate before adjustments for inflation; the rate quoted by financial institutions.

Real Interest Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the real cost of funds to the borrower and the real yield to the lender.

Inflation

The rate of increase in the general price level for goods and services, leading to a decline in buying power.

Inflation

The pace at which the average price for goods and services climbs, weakening the capacity to purchase.