A Zero-Investment Portfolio with a Positive Expected Return Arises

question 12

Multiple Choice

A zero-investment portfolio with a positive expected return arises when

• A) an investor has downside risk only.
• B) the law of prices is not violated.
• C) the opportunity set is not tangent to the capital-allocation line.
• D) a risk-free arbitrage opportunity exists.

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Definitions:

Output

The total quantity of goods or services produced by a company or an economy.

Average Total Cost

The total cost of production divided by the number of units produced, representing the per-unit cost of production including both fixed and variable costs.

AVC

Average Variable Cost refers to the cost of producing each unit that varies with the volume of output.

AFC

Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced.