Why does diversification fail to reduce risk when the returns of the two investments purchased are perfectly positively correlated?
What will be an ideal response?
If two returns are perfectly positively correlated, then what happens to one in terms of rising or falling will happen to the other.
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What can account for the negative slope of the marginal revenue product curve?
A) Diminishing marginal utility B) Diminishing marginal returns C) Monopsony power D) All workers eventually begin slacking. E) none of the above
The usual results of an adverse supply shock are
a. a rise in prices and a fall in output. b. a fall in prices and a rise in output. c. increased growth and lower inflation. d. a rise in prices and a rise in output.
Consider a market characterized by the following inverse demand and supply functions: PX = 10 - 2QX and PX = 2 + 2QX. An $8 per unit price floor will result in a
A. surplus of 2 units. B. surplus of 3 units. C. shortage of 3 units. D. shortage of 1 unit.
In a perfectly competitive industry
A) each firm is a price maker. B) no buyer or seller can influence the market price. C) there is apt to be a shortage of sellers of output. D) firms can never make an economic profit.