Assume You Are Looking at a Graph Depicting the Security

question 13

Multiple Choice

Assume you are looking at a graph depicting the security market line. If the market risk premium increases, then the:

• A) Market rate of return will plot at a lower point on the vertical axis.
• B) Intercept point of the security market line will rise up the vertical axis.
• C) Point depicting the market rate of return will shift to the right parallel to the horizontal axis.
• D) Slope of the security market line will rise while the intercept point remains constant.
• E) Slope of the security market line will rise as the intercept point rises up the vertical axis.

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Definitions:

Marginal Product

The marginal product is the additional output resulting from a one-unit increase in the use of a variable input, holding all other inputs constant, in the production process.

Units of Output

The measure of total production or services produced by a company or sector.

Workers

Individuals engaged in any form of employment or labor, including both physical and intellectual efforts, contributing to the production process.

Marginal Product

The additional output generated by employing one more unit of a particular input, keeping other inputs constant.