The Primary Benefit of Diversification Is ________

question 116

Multiple Choice

The primary benefit of diversification is ________.

• A)an increase in expected return
• B)an equal reduction in risk and return
• C)a reduction in risk
• D)Diversification has no real benefit; it is a shell game promoted by investment advisors who are the only real winners.

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Definitions:

Decreasing-cost Industry

An industry where the cost per unit of output decreases as the scale of production increases.

Long-run Equilibrium Price

The price level at which the quantity supplied equals the quantity demanded, achieved over a period where all inputs can be varied by producers.

Increase in Demand

A situation where there is a rise in consumers' desire to purchase goods or services, leading to higher quantity demanded at every price level.

Constant Costs

Occur when the cost of producing an additional unit of a good does not change as the scale of production increases or decreases.