According to the Tiebout Hypothesis

question 80

Multiple Choice

According to the Tiebout hypothesis,

• A) an optimal (or most efficient) level of output exists for every public good.
• B) an efficient mix of public goods is produced when local land/housing prices and taxes reflect consumer preferences.
• C) a good or service is usually so costly that its provision generally does not depend on whether any single person pays.
• D) under certain conditions, when externalities are present, private parties can arrive at the efficient solution without government involvement.

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Definitions:

Required Return

The smallest yearly percentage gain from an investment necessary to entice people or corporations to invest in a certain security or endeavor.

Risk Aversion

The tendency of investors to prefer lower risk or safer investments to avoid potential losses.

Portfolio Beta

A measure of a portfolio's volatility in relation to the market as a whole; it indicates the sensitivity of the portfolio's returns to market movements.

SML Shifts

Changes in the Security Market Line, a graphical representation of the Capital Asset Pricing Model (CAPM) that shows different levels of systematic, or market, risk versus return for the whole market.