An Initial Public Offering Is

question 133

Multiple Choice

An initial public offering is:

• A) the first time a corporation sells stock to the public in order to raise capital.
• B) a sophisticated IOU that documents who owes how much and when payment must be made.
• C) something of value that by agreement becomes the property of the lender if the borrower defaults.
• D) the decrease in private consumption and investment that occurs when government borrows more.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market; it represents the total net benefit to society from the production and consumption of a good.

Equilibrium

Describes a state in a market where the quantity of a product supplied is equal to the quantity of the product demanded, leading to a stable price.

Gains from Trade

The benefits that parties obtain by engaging in voluntary trade, allowing them to acquire goods and services they desire at less cost compared to self-production.

Total Surplus

The combined measure of consumer surplus and producer surplus in a market, representing the total benefits to society from the production and consumption of goods and services.