Which of the Following Is True of Stocks

question 89

Multiple Choice

Which of the following is true of stocks?

• A) Stock ownership is risky because the investor can never be sure what return they will earn or what the value of their stock holdings will be in the future.
• B) The riskiness of stocks is one reason why their average rate of return has been higher than investments like bonds that guarantee a specified nominal amount in the future.
• C) Both a and b are true.
• D) Neither a nor b is true.

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Definitions:

Law Of Diminishing Returns

An economic principle stating that if one factor of production is increased while others remain constant, the overall marginal returns will eventually decrease.

Average Output

The total output produced divided by the number of units of input, measuring the efficiency or productivity of production.

Diminishing Marginal Returns

The principle that as an additional unit of a factor of production is added to a fixed amount of other factors, the increase in output will eventually decrease.

Variable Inputs

Refers to inputs used in production that can be adjusted in the short term to meet changes in output levels, such as labor or raw materials.