Profitability Is an Important Indicator of the Financial Stability of an ADI

question 3

Multiple Choice

Profitability is an important indicator of the financial stability of an ADI because:

• A)it is a direct indicator of financial viability
• B)losses by an ADI can result in substantial withdrawals by their depositors
• C)losses by an ADI can trigger a run on similar institutions.
• D)All of these.
• E)None of these.

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Definitions:

Oligopoly

A market structure characterized by a small number of large firms dominating the industry, often leading to limited competition.

Total Market

The complete demand for a product or service within an industry, encompassing all consumers and market segments.

Imperfect Competition

A market structure characterized by the imperfect (less than perfect) competition among the participating players, leading to companies having some control over prices.

Purely Competitive

A market structure characterized by many buyers and sellers, where each participant is a price-taker, with goods being homogeneous.