Explain why returns on assets compensate for systematic risk but not for idiosyncratic risk.
What will be an ideal response?
Idiosyncratic risk can be reduced through diversification. Systematic risk cannot since it affects all assets.
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Abe can catch 15 pounds of fish an hour or pick 30 pounds of fruit an hour. He works an 8-hour day, spending 5 hours picking fruit and 3 hours catching fish. Calculate Abe's opportunity cost of a pound of fruit
A) 6 minutes B) 3 hours a day C) 2 pounds of fish D) 0.5 pounds of fish
In the United States since 1900, life expectancy at birth has ________ and the death rate has ________
A) decreased; increased B) increased; increased C) decreased; decreased D) increased; decreased
If it is particularly difficult for the corporate headquarters to determine the correct transfer price
a. average costs is a good enough approximation b. average variable costs is a good enough approximation c. a similar products market price is a good enough approximation d. the upstream division could be run as a cost center
The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.