Use the Following to Answer Questions

question 270

Multiple Choice

Use the following to answer questions:
Figure: The Market for Yachts
-(Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the government imposes a $30,000 tax on yachts (collected from the producers) , consumers will pay _____ of the tax and producers will pay _____.

• A) $20,000; $10,000
• B) $15,000; $15,000
• C) $10,000; $20,000
• D) $5,000; $25,000

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Definitions:

CAPM

Capital Asset Pricing Model, a theory that delineates the correlation between expected return on investments and the inherent systematic risk, especially in the context of equities.

Security Characteristic Line

Represents a regression line that displays the relationship between a security's returns and the market's returns, used to assess risk and performance.

Security Market Line

A representation of the capital asset pricing model (CAPM) which displays the expected return of a security as a function of its systematic, or non-diversifiable, risk.

Cyclical Beta

A measure of how sensitive a stock's price is to economic cycles, with higher values indicating greater sensitivity.