The Following Figure Depicts a Generalized Downward-Sloping Market Demand (D)curve

question 153

Multiple Choice

The following figure depicts a generalized downward-sloping market demand (D) curve for a product.It also shows the firm's relevant marginal revenue (MR) curve and marginal cost (MC) curve.Use this figure to answer the following questions:

-If the firm moves from a perfect price-discrimination model to a perfect competition framework,there would be ________ in total welfare.

• A) a loss of $160
• B) a gain of $80
• C) a loss of $40
• D) a gain of $120
• E) no change

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Definitions:

Overpriced Security

A security trading at a price believed to be higher than its theoretical value or intrinsic worth.

Expected Market Rate

The anticipated rate of return on an investment as predicted by investors based on historical market data and trends.

Abnormal Return

Return on a stock beyond what would be predicted by market movements alone. Cumulative abnormal return (CAR) is the total abnormal return for the period surrounding an announcement or the release of information.

Mean-Variance Optimizers

Tools used in finance to allocate assets in a portfolio in a way that maximizes return for a given level of risk based on the expected returns and variances of those assets.