Scenario: Three Investment Options Are Available in a Market

question 37

Multiple Choice

Scenario: Three investment options are available in a market. All three options provide the same expected rate of return but have different levels of risk associated with them. Investing in Option A is the riskiest, while investing in Option C is the safest. Option B has a moderate level of risk associated with it.
-Refer to the scenario above.Which investment option will a risk-seeking individual choose?

• A) She will choose to invest in Option A.
• B) She will choose to invest in Option B.
• C) She will choose to invest in Option C.
• D) She will be indifferent to investing in any of the three options.

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Definitions:

Labor

The human effort, both physical and mental, employed in the production of goods and services.

Value of Marginal Product

The increment in revenue a firm realizes from employing one additional unit of input, holding all other factors constant.

Output

The quantity of goods or services produced by a company, sector, or economy.

Diminishing Marginal Product

A principle stating that as additional units of a variable input are added to a fixed input, the marginal product of the variable input eventually decreases.