If Equilibrium Is Achieved in a Competitive Market

question 76

Multiple Choice

If equilibrium is achieved in a competitive market,

• A)there is no deadweight loss.
• B)the deadweight loss will be maximised.
• C)the deadweight loss will equal the sum of consumer surplus and producer surplus.
• D)the deadweight loss will be the same as the opportunity cost of the last unit of output sold.

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Definitions:

Illiquidity Premiums

Additional return expected by investors for holding assets that are difficult to trade quickly without significant price concessions.

Systematic Risk Factors

Events or conditions that affect all assets to some degree, such as macroeconomic changes, geopolitical incidents, or widespread financial crises.

Trading Costs

Expenses associated with buying and selling securities, including commissions, spreads, and impact costs.

Perpetual Cash Flow

A stream of cash flows that continues indefinitely, often used in financial modeling to value businesses or investments with steady, ongoing income.