Restricting the Importation of Foreign Automobiles Will

question 104

Multiple Choice

Restricting the importation of foreign automobiles will:

• A) raise the price of foreign automobiles but decrease the price of domestic automobiles.
• B) raise the price of both foreign and domestic automobiles.
• C) cause domestic producers to sell their automobiles at lower prices because of reduced competition.
• D) lower the price of foreign automobiles but raise the price of domestic automobiles.

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Definitions:

Undervalued

A term used to describe an asset or security whose price is considered to be lower than its intrinsic or true value.

Security Market Line

A graphical representation of the expected return of investments at different levels of risk, based on the Capital Asset Pricing Model (CAPM).

Market Risk Premium

The excess return that investors require for choosing a risky investment over a risk-free one.

Excess Return

The return on an investment that exceeds the return on a risk-free asset such as a Treasury bond.