Consider a Market That Is in Equilibrium

question 110

Multiple Choice

Consider a market that is in equilibrium.If it experiences both a decrease in demand and an increase in supply,what can be said of the new equilibrium? The equilibrium:

• A) price and quantity will both rise.
• B) quantity will definitely fall, while the equilibrium price cannot be predicted.
• C) price will definitely fall, while the equilibrium quantity cannot be predicted.
• D) price and quantity will both fall.

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Definitions:

Risk-Free Rate

This refers to the theoretical rate of return of an investment with no risk of financial loss, typically represented by government bonds.

Intrinsic Value

The fundamental, true value of an asset based on its characteristics and cash flow, independent of its current market price.

Beta

A measure of a stock's volatility in relation to the overall market, indicating the stock's sensitivity to market movements.

Risk-Free Rate

A hypothetical interest rate associated with an absolutely risk-free investment, typically exemplified by government securities.