For Markets to Be in Equilibrium,that Is,for There to Be $\overline { \mathrm { r } } = \hat { \mathrm { r } }$

question 48

Multiple Choice

For markets to be in equilibrium,that is,for there to be no strong pressure for prices to depart from their current levels,

• A)The past realized rate of return must be equal to the expected future rate of return; that is, \(\overline { \mathrm { r } } = \hat { \mathrm { r } }\) .
• B)The required rate of return must equal the past realized rate of return; that is, r = \(\overline { \mathbf { r } }\) .
• C)The expected rate of return must be equal to the required rate of return; that is, \(\hat { r}\) = r.
• D)All of the above statements must hold for equilibrium to exist; that is \(\hat { r}\) = r = \(\overline { \mathbf { r } }\) .
• E)None of the above statements is correct.

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Definitions:

Optimal Output

The level of production that maximizes a firm's profit or minimizes its cost, given its production function and market conditions.

Price to Clear

Price to Clear is the market price at which the quantity of goods supplied is equal to the quantity of goods demanded, thereby clearing the market.

Profit Per Unit

The revenue obtained per unit of a product or service sold, minus the cost per unit.

Optimal Output

The level of production that generates the highest possible profit for a firm, taking into account costs and revenue.