Which Statement Is True

question 16

Multiple Choice

Which statement is true?

• A)The further down a food and shelter budget line a consumer moves, the more of his budget he is spending.
• B)When the price of good X (on the horizontal axis) falls and the price of good Y rises, the budget line gets steeper.
• C)When Pete adopts a corner solution he is definitely not maximizing utility.
• D)The "composite good" shows the amount of money the consumer has spent on good X in the two good optimizing model.

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Definitions:

Required Return

The minimum rate of return on an investment that investors expect to compensate them for the level of risk.

Beta

A measure of a stock's volatility relative to the overall market, indicating its risk compared to the market average.

Risk-free Rate

The return on investment with no risk of financial loss, often represented by the yield on government securities.

CAPM

Capital Asset Pricing Model; a financial model that describes the relationship between systematic risk and expected return for assets, particularly stocks.