Use the Following Information to Answer the Question(s)below

question 101

Multiple Choice

Use the following information to answer the question(s) below.
Suppose all possible investment opportunities in the world are limited to the four stocks listed in the table below:
-Suppose that you have $100,000 invested in the market portfolio and that the stock price of Taggart Transcontinental suddenly drops to $7.80 per share.Which of the following trades would you need to make in order to maintain your investment in the market portfolio: 1.Buy approximately 1140 shares of Taggart Transcontinental
2.Sell approximately 256 shares of Rearden Metal
3.Sell approximately 57 shares of Wyatt Oil
4.Sell approximately 148 shares of Nielson Motors

• A)1 only
• B)2 only
• C)2,3,and 4 only
• D)1,2,3,and 4
• E)None of the above

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Definitions:

Monopolistically Competitive

A market structure characterized by many firms selling differentiated products, allowing for some degree of market power.

Monopolistically Competitive

A business configuration in which various enterprises provide goods that are comparable, though not identical, affording them a measure of market dominance and the capacity to differentiate their products.

Economic Profit

The profit a company makes after deducting both its explicit (direct) and implicit (opportunity) costs; it's a more comprehensive measure than accounting profit.

Allocative Efficiency

The optimal distribution of resources in a market where goods and services are dispensed according to consumer preferences.