If the Price Is Lower That the Equilibrium Price, Which

question 2

Multiple Choice

If the price is lower that the equilibrium price, which of the following will occur?

• A) The price will remain low.
• B) The price will reduce even more.
• C) The price will raise to the equilibrium price.
• D) Demand will shift.

---

Definitions:

Fama and French

Two renowned economists who developed the three-factor model explaining stock returns on the basis of market risk, size, and value.

Dividend-Discount Model

A method for determining the value of a stock by using predicted dividends and discounting them back to present value.

Mehra and Prescott

Two economists known for their work in the economics field, particularly for the Equity Premium Puzzle which questions why stocks have historically outperformed safer assets by such a wide margin.

Average Excess Returns

The average return on an investment above the benchmark or risk-free rate.