A Scatter Diagram with the Price of Peanut Butter on the Vertical

question 50

Multiple Choice

A scatter diagram with the price of peanut butter on the vertical axis and the price of jelly on the horizontal axis shows a negative relationship. If the price of jelly was placed on the vertical axis and the price of peanut butter was placed on the horizontal axis, the relationship would be a

• A) negative relationship, also called a direct relationship.
• B) negative relationship, also called an inverse relationship.
• C) positive relationship, also called a direct relationship.
• D) positive relationship, also called an inverse relationship.

---

Definitions:

Optimal Risky Portfolio

The combination of investments that provides the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Expected Utility

A theory in economics that assesses the utility or satisfaction an agent expects to receive from different outcomes, taking into account their risk preferences.

Less Risk-averse Investors

Less risk-averse investors are those willing to take on greater risks for the potential of higher returns, as opposed to being risk-averse who prefer safer, lower-return investments.

Probability Distribution

A mathematical description of the likelihood of various outcomes from a random event or experiment.