A Criticism of the CAPM Is That It

question 38

Multiple Choice

A criticism of the CAPM is that it:

• A) ignores the return on the market portfolio.
• B) ignores the risk-free return.
• C) requires a single measure of systematic risk.
• D) utilizes too many factors.

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Definitions:

Variable Resources

Inputs used in production that can be adjusted in the short term to meet changes in output levels, such as labor and raw materials.

AVC Curve

Represents the average variable cost of production plotted against the quantity of output, showing how variable costs per unit change with changes in output.

MC Curve

Short for Marginal Cost Curve, it represents the change in total cost that arises when the quantity produced is incremented by one unit.

Marginal Cost

The increase in cost that arises from producing one additional unit of a good or service.