Consider a Value-Weighted Market Index That Includes the Two Companies

question 79

Multiple Choice

Consider a value-weighted market index that includes the two companies shown in the table. You form a portfolio to mimic the index on Day 1. The mimic portfolio is designed to earn the same return as the index. What is the portfolio weight for Company 1? $$\begin{array} { | c | c | c | c | c | } \hline & \text { Company 1 } & \text { Company 1 } & \text { Company 2 } & \text { Company 2 } \\\hline \text { Day } & \text { Price } & \text { \# of Shares } & \text { Price } & \text { \# of Shares } \\\hline 1 & \$ 6.62 & 200 & \$ 10.00 & 750 \\\hline \mathbf { 2 } & \$ 7.24 & 200 & \$ 10.54 & 750 \\\hline\end{array}$$

• A)15%
• B)16%
• C)17%
• D)18%
• E)19%

Evaluate the role of government regulation in monopolistic markets and its impact on output and pricing.

Understand the concepts of marginal revenue and how it relates to monopolist's pricing and output decisions.

Recognize the barriers to entry created by monopolies and their implications for competition.

Identify the relationship between monopoly equilibrium, economic efficiency, and social welfare.

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Definitions:

Connector Division

is a term that could refer to a specific segment or department within a company focused on the production or distribution of connectors, though it can vary widely depending on the context and industry.

Maximum Price

The maximum amount a buyer is prepared to offer or a seller is ready to take for a product or service.

Industrial Products Division

A segment of a company focused on the production and sale of goods used in industrial and manufacturing processes.

Receiver Division

The part of a business that receives allocated costs from service departments or benefits from intercompany transactions within a company.