A Fundamental Principle Is That a Financial Asset's Price Changes

question 37

Multiple Choice

A fundamental principle is that a financial asset's price changes in ________.

• A) the same direction of the change in the required rate of return.
• B) the same direction of the change in the required yield.
• C) unknown and unpredictable ways compared to the change in the required yield.
• D) the opposite direction of the change in the required rate of return or the required yield.

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Definitions:

Economies of Scale

The economic gains achieved by businesses because of their large scale, volume of production, or extent of operations, which usually results in a reduction in the cost per unit as the scale of operation grows.

Cost-output Elasticity

Cost-output elasticity measures the responsiveness of the cost of producing a good to a change in the output level, indicating how costs change as production scales.

Marginal Cost

The increase in expenditure resulting from the production of an additional unit of a good or service.

Short-run Cost Function

The relationship between the cost of production and the level of output when at least one input is fixed in the short term.