Which of the Following Statements Is False

question 29

Multiple Choice

Which of the following statements is false?

• A) If indeed alphas are positive, it is possible that the positive alpha trading strategies contain risk that investors are unwilling to bear but that the CAPM does not capture.
• B) If indeed alphas are positive, it is possible that the costs of implementing investment strategies are larger than the NPVs of undertaking them.
• C) If indeed alphas are positive, then investors have to be systematically ignoring positive-NPV investment opportunities.
• D) The only way a positive-NPV investment opportunity can exist in a market is if some barrier to entry restricts competition.

---

Definitions:

Innovation

The process of creating new ideas, products, or methods that bring something novel to the market or society.

Marginal Utility

The additional contentment or value obtained by consuming one more unit of a good or service.

Utility-maximizing Combination

is a selection of goods and services that provides the highest level of satisfaction or utility to an individual, given their budget constraints.

Total Utility

The total satisfaction received from consuming a particular amount of goods or services.