The Theory of Consumer Behavior Assumes That Consumers Attempt to Maximize

question 102

Multiple Choice

The theory of consumer behavior assumes that consumers attempt to maximize

• A)the difference between total and marginal utility.
• B)total utility.
• C)average utility.
• D)marginal utility.

Grasp the Capital Asset Pricing Model (CAPM) and its applications in determining required returns on stocks.

Comprehend how market conditions, such as changes in the risk-free rate and market risk premium, influence stock and portfolio returns.

Recognize the principle of diversification and its effects on portfolio risk.

Identify the factors that cause shifts in the Security Market Line (SML) and understand the implications of such shifts.

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Definitions:

Bid-Ask Spread

The difference between the highest price that buyers are willing to pay for an asset and the lowest price that sellers are willing to accept.

Commission Income

Revenue earned by an individual or company for facilitating a transaction or service, often a percentage of the transaction value.

Price Continuity

The concept that securities should have consistent pricing through time without large gaps or discontinuities.

Stop-Loss Order

A buy or sell order for a stock or other security set at a specified price level, meant to limit an investor's loss on a security position.