Table 2-13 Table 2-13 Shows the Output Per Day of Day

question 69

Multiple Choice

Table 2-13
Table 2-13 shows the output per day of two pet groomers, Tammi and Horace. They can either devote their time to grooming dogs or bathing cats.
-Refer to Table 2-13. Which of the following statements is true?

• A) Horace has a comparative advantage in both tasks.
• B) Tammi has a comparative advantage in both tasks.
• C) Horace has a comparative advantage in grooming dogs and Tammi in bathing cats.
• D) Horace has a comparative advantage in bathing cats and Tammi in grooming dogs.

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Definitions:

Expected Risk Premium

The additional return over the risk-free rate that investors demand to compensate for the risk of holding a risky asset.

Systematic Risk Principle

The concept that an investor can reduce the overall risk of an investment portfolio through diversification, except for inherent market risks that cannot be diversified away.

Efficient Markets Hypothesis

The efficient markets hypothesis is an investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information.

Security Market Line

A representation in finance that shows the relationship between risk and return of a market.