An important characteristic of market equilibrium is ________.
A)the presence of many opportunities for creating zero-investment portfolios
B)all investors exhibiting the same degree of risk aversion
C)the absence of arbitrage opportunities
D)the a lack of liquidity in the market

Question

Quizplus · Accepted Answer

The absence of arbitrage opportunities is an important characteristic of market equilibrium. This means that there are no ways for investors to earn riskless profits, indicating that asset prices are correctly valued and reflect the available information. A lack of arbitrage opportunities ensures that the market is efficient and that prices are in balance. Choices A, B, and D are incorrect because they do not accurately describe market equilibrium.

An Important Characteristic of Market Equilibrium Is ________