How Is the Calculation of a Variance Affected by an Observation

question 15

Multiple Choice

How is the calculation of a variance affected by an observation with a negative rate of return when other returns are positive?

• A)it reduces the variance.
• B)it increases the variance.
• C)variance is not affected by negatives or positives.
• D)the effect cannot be determined from this information.

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Definitions:

Long-Run Profits

Earnings that a firm expects to generate over an extended period, taking into account all variable and fixed costs.

Excess Capacity

The situation where a firm produces less than its total output capacity, often due to lack of demand.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and price setting.

Long-Run Equilibrium

A state in which all inputs can be adjusted by firms, market supply equals demand, and there is no incentive for economic actors to alter their behavior.