An Increase in the Risk-Free Rate Causes the SML to Shift

question 40

True/False

An increase in the risk-free rate causes the SML to shift down parallel to the old SML.

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Definitions:

Marginal Cost of Production

The change in total production costs that comes from making or producing one additional item.

Advertising Elasticity of Demand

Measures the responsiveness of the quantity demanded of a good or service to a change in the level of advertising for that good or service.

Rule of Thumb

A general principle that provides practical instructions for accomplishing or approaching a certain task.

Reservation Price

The maximum price a buyer is willing to pay for a good or service, beyond which the buyer will forego the purchase.