As the Level of Activity Decreases Within the Relevant Range

question 116

Multiple Choice

As the level of activity decreases within the relevant range:

• A) fixed costs per unit decreases
• B) total variable costs increase
• C) variable costs per unit remain unchanged
• D) total fixed costs increase

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Definitions:

Unique Risk

Another term for diversifiable risk, emphasizing the idea that this risk is specific to an individual investment and not the market as a whole.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk, which cannot be eliminated through diversification.

Capital Allocation Line

A line on a graph that shows the rates of return of portfolios that optimally combine risk and return for an investor.

Risk-averse Investors

Individuals who prefer lower returns with known risks rather than higher returns with unknown risks.