If the Market Rate of Return Is 12%, and the Beta

question 101

Multiple Choice

If the market rate of return is 12%, and the beta on Consolidated Edison is .8, the return on Con Ed is:

• A) greater than 12%
• B) less than 12%
• C) greater or less than 12%, depending on the risk-free rate of return
• D) dependent on some other factors

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Definitions:

Profit-maximizing

The process or strategy of adjusting production and operations to achieve the highest possible profit under given conditions.

Fixed Factor

A resource in the production process whose quantity cannot readily be changed in the short term.

Production

The process of creating goods or services by combining various inputs in order to make products that are suitable for consumption or further production.

Increasing Returns To Scale

A situation in production where an increase in the scale of inputs leads to a more than proportional increase in output.