Idiosyncratic risk:
A. is unique to a particular company or asset.
B. is not generally absent from index funds.
C. can not be eliminated through diversification.
D. All of these are true.
Answer: A
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Suppose we observe that the demand for eggs increases when people buy more potatoes. We can conclude that eggs and potatoes are
A) inferior goods. B) normal goods. C) complements. D) substitutes.
Which of the following is true of public goods?
a. The market mechanism helps to signal the quantity that is demanded by the public. b. Payment for consumption is efficiently provided by market prices. c. Consumption by one person does not preclude consumption of the same good by another person. d. The public sector is guided to produce the correct quantity by market prices. e. Voluntary contributions will be sufficient to finance the production of public goods.
The income effect of a decrease in the price of potatoes (an inferior good) is a(n)
a. decrease in the demand for potatoes b. decrease in the quantity demanded of potatoes c. increase in the demand for potatoes d. increase in the quantity demanded of potatoes e. new demand curve because everything else is no longer constant
If a firm in a perfectly competitive market faces a market price of $7, and it decides to increase its production from 4,000 to 12,000 units, the firm's marginal revenue will:
A. diminish once diminishing marginal product sets in. B. rise once diminishing marginal product sets in. C. stay the same. D. increase from $28,000 to $84,000.