Individual Investors

question 316

Multiple Choice

Individual investors:

• A) Should expect to earn a rate of return based on the total risk of their portfolios.
• B) Need to own at least 50 stocks if they wish to create a diversified portfolio.
• C) Are responsible for eliminating unsystematic risk.
• D) Can create a portfolio such that the portfolio beta is less than the lowest beta of any security held in the portfolio.
• E) Can generally create a diversified portfolio of risky assets such that the standard deviation of the portfolio equals zero.

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Definitions:

Average Total Cost

The total cost of production divided by the number of units produced, including both fixed and variable costs.

Long-Run Equilibrium

A state in which all factors of production and outputs in an economy are fully adjusted so that economic inputs meet outputs in a sustainable way, leading to no excess demand or supply.

Monopolistic Competition

Monopolistic competition is a market structure characterized by many producers selling products that are similar but not identical, allowing for some degree of market power and product differentiation.

Economic Inefficiencies

Situations where resources are not used optimally according to consumer preferences, often leading to wasted resources or unmet demands.