^{Refer to the graph}

question 194

Multiple Choice

^{Refer to the graph. An increase in the Security Market Line from SML}1 ^{to SML}2 ^{and an increase in the average expected rate of return of asset A from Y}1 ^{to Y}2 ^{would be explained by}

• A)arbitrage only.
• B)a restrictive monetary policy only.
• C)both arbitrage and a restrictive monetary policy.
• D)neither arbitrage nor a restrictive monetary policy.

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Definitions:

Marginal Product

Enhanced output originating from the inclusion of an additional input unit.

Total-Cost Curve

A graphical representation of the total costs associated with producing varying quantities of output, showing how costs change with changes in output.

Production Function

A mathematical model that represents the relationship between the input of factors of production and the output of goods or services produced.

Marginal-Cost Curve

A graphical representation depicting how the cost of producing one additional unit of a good varies as the quantity produced changes.