Let W Be the Number of Whips and J the Number

question 62

Multiple Choice

Let w be the number of whips and j the number of leather jackets. If Kinko's utility function is U(x, y) = min{ 7w, 4w + 12j}, then if the price of whips is $20 and the price of leather jackets is $40, Kinko will demand

• A) 4 times as many whips as leather jackets.
• B) 6 times as many whips as leather jackets.
• C) 3 times as many whips as leather jackets.
• D) 5 times as many leather jackets as whips.
• E) only leather jackets.

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Definitions:

CAPM

Capital Asset Pricing Model, a theory that delineates the correlation between expected return on investments and the inherent systematic risk, especially in the context of equities.

Security Characteristic Line

Represents a regression line that displays the relationship between a security's returns and the market's returns, used to assess risk and performance.

Security Market Line

A representation of the capital asset pricing model (CAPM) which displays the expected return of a security as a function of its systematic, or non-diversifiable, risk.

Cyclical Beta

A measure of how sensitive a stock's price is to economic cycles, with higher values indicating greater sensitivity.