Question

A risk premium is a the difference between the earnings of a low risk asset and a high risk asset Ob premium paid to a security holder to compensate him for bearing a higher risk c. both A&B od none of the above QUESTION 3 Profits of a monopoly are driven to zero a In the long run because the demand curve becomes more inelastic b. Immediately in the short-run as assets freely move from low-valued uses to high-valued uses instantly c. In the short run because the demand curve becomes more elastic d In the long run because the assets eventually move from low to high valued use QUESTION 4 In a market where the equilibrium price is $7, any price higher than $7 would cause a a balanced demand and supply b. a surplus c. a shortage d none of the above IICTION Click Save and submit to save and submit. Click Save All Answers to save all answers

Answer 1

The correct answer is 'Option A'.

A risk premium is the difference between the earnings of a low risk asset and a high risk asset. It refers to difference between the expected return of a risky asset and the return of a risk-free asset which induce an investor to invest in a risky asset rather than a risk-free asset if the return on the risky asset is more than the return on a risk-free asset.

3. The correct answer is 'Option D'.

The profits of a monopoly are driven to zero in the long-run because in the long-run, assets are mobile and can be easily moved which drive the profits to zero. Moreover, the assets are moved from low to high valued use in the long-run, so the profits of a monopoly are driven to zero in the long-run.

4. The correct answer is 'Option B'.

If the market equilibrium price is $7 then any price higher than $7 will reduce the quantity demanded of the product and reduce the demand. This will create surplus in the market because consumers will purchase less as compared to what is supplied in the market.