Profits from Speculation Arise Because of

question 97

Multiple Choice

Profits from speculation arise because of

• A)the spread between the bid and ask prices on bonds.
• B)the illiquidity of markets for derivative instruments.
• C)the high information costs in markets for derivative instruments.
• D)disagreements among traders about future prices of a commodity or financial instrument.

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Definitions:

Monopoly Power

The ability of a single seller to control market prices and total market output.

Collective Profit

The total profit earned by a group of entities or an industry, considering all its members.

Pure Monopoly

A market structure characterized by a single seller selling a unique product in the market. In a pure monopoly, the single seller controls the entire market supply and sets prices.

Allocative Inefficiency

A situation where resources are not allocated in a way that maximizes the welfare or utility of consumers, often leading to a loss of economic efficiency.