The Benefit Added by the 50,000th User in a New

question 156

Multiple Choice

The benefit added by the 50,000th user in a new network is _____ than the benefit added by 50,000,000th user, due to _____ returns to the network externality.

• A) larger; increasing
• B) larger; diminishing
• C) smaller; increasing
• D) smaller; diminishing

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Definitions:

Risk Premium

The extra return expected by an investor for holding a risky investment over a risk-free one.

Well-Diversified Portfolios

Investment portfolios that contain a wide variety of assets, aiming to minimize risk by spreading investments across different sectors or asset classes.

APT

Abbreviation for Arbitrage Pricing Theory, a multifactor financial model that describes the relationship between the return of a portfolio and the return of a single asset through a linear combination of macroeconomic factors.