As Manager of a Mutual Fund, Your Job Is to Buy

question 45

Essay

As manager of a mutual fund, your job is to buy stocks in companies whose stock price will rise. You decide to only buy stocks of monopoly companies rather than perfectly competitive companies. Your rationale: the monopoly company stocks are a "sure-thing" since customers have no alternative suppliers, which means monopolies earn much more profit than perfectly competitive firms (which you expect to result in higher stock prices for the monopoly companies). What is wrong with assuming that monopolies must be profitable? Explain, using a diagram to illustrate your explanation.

---

Definitions:

Dizygotic Twins

Often called fraternal twins, occurring when two individual eggs get fertilized by separate sperm, resulting in two zygotes in the uterus at the same time.

Mitosis

A process of cell division in eukaryotic cells that results in two genetically identical daughter cells from a single parent cell, essential for growth and tissue repair.

Behavioral Genetics

Field of study devoted to discovering the genetic bases for personality characteristics.

Inherited Traits

Characteristics or attributes that are passed from parents to their offspring through genes.