Indifference Theory Is Based on the Assumption That

question 43

Multiple Choice

Indifference theory is based on the assumption that

• A) the consumer is able to quantify the difference in total utility received from two different consumption bundles.
• B) the consumer receives the same utility and is therefore indifferent between any two consumption bundles.
• C) the consumer has equated the marginal utilities of all products, and is therefore indifferent between consumption bundles.
• D) consumers can always say which of two consumption bundles they prefer without having to say by how much they prefer it.
• E) consumers are not able to rank consumption bundles in order of preference.

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Definitions:

Time-Weighted Return

A measure used to evaluate the performance of an investment portfolio by calculating the compound rate of growth over a specified period, eliminating the impact of inflows and outflows of money.

Dividend

A portion of a company's earnings that is paid to shareholders, typically on a quarterly basis, as a reward for investing in the company.

Share

A unit of ownership interest in a corporation or financial asset that gives the holder a claim on part of the corporation's assets and earnings.

Sharpe Measure

A ratio used to evaluate the risk-adjusted return of an investment, calculated by subtracting the risk-free rate from the return of the investment and dividing by the standard deviation of the investment's returns.