Unsystematic Risk

question 97

Multiple Choice

Unsystematic risk:

• A) Can be effectively eliminated through portfolio diversification.
• B) Is compensated for by the risk premium.
• C) Is measured by beta.
• D) Cannot be avoided if you wish to participate in the financial markets.
• E) Is related to the overall economy.

---

Definitions:

Short-run Equilibrium

A state where supply and demand are balanced at a particular price level within a short-term period, with at least one fixed input.

Cost

The amount of money or resources spent in the production of goods and services.

Economic Profits

The gap between the overall earnings and combined expenditures, taking into account both overt and hidden costs.

Competitive Markets

Markets in which there are many buyers and sellers, so no single buyer or seller can influence the price.