If the Price of Corn Goes Up by $1 a Bushel

question 48

True/False

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

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Definitions:

Capital Allocation Line

A line on a graph that shows the rates of return of portfolios that optimally combine risk and return for an investor.

Risk-averse Investors

Individuals who prefer lower returns with known risks rather than higher returns with unknown risks.

Optimal Risky Portfolio

An investor’s best combination of risky assets; the combination that maximizes the Sharpe ratio.

Expected Utility

A theory in economics that calculates the utility expected from an investment or action, considering all possible outcomes weighted by their likelihood.