Suppose That Because of Climatic Conditions, the Smog Levels in Los

question 142

Multiple Choice

Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly soar to dangerous levels.The most successful policy in this case would be

• A)direct controls to limit driving.
• B)taxes on drivers at rush hours.
• C)voluntary cooperation to reduce driving.
• D)removal of autos with excessive emissions.

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Definitions:

Variance

A measure of the dispersion of a random variable. Equals the expected value of the squared deviation from the mean.

Fairly-Priced Securities

Securities that are believed to be priced appropriately according to their risk level and the expected rate of return.

Positive Betas

A term referring to financial securities that have a beta greater than zero, indicating that their returns generally move in the same direction as the market.

Zero Alphas

Situations in which an investment performs exactly as expected according to its beta, showing neither added nor diminished value.