Which of the Following Statements Is False

question 9

Multiple Choice

Which of the following statements is false?

• A) The tangent portfolio is efficient and that, once we include the risk-free investment, all efficient portfolios are combinations of the risk-free investment and the tangent portfolio.
• B) The optimal portfolio of risky investments depends on how conservative or aggressive the investor is.
• C) By combining the efficient portfolio with the risk-free investment, an investor will earn the highest possible expected return for any level of volatility her or she is willing to bear.
• D) The efficient portfolio is the tangent portfolio, the portfolio with the highest Sharpe ratio in the economy.

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Definitions:

Purely Competitive Market

A market structure characterized by many buyers and sellers, homogeneous products, and no barriers to entry or exit, leading to minimal market power for individual firms.

Long Run Adjustments

Changes made by firms or economies over time to adapt to market conditions, wherein all inputs can be varied and no factors are fixed.

Industry Profits

The total earnings generated by companies within a specific industry, after all costs and expenses are deducted.

Increasing-cost Industry

An industry in which the costs of production increase as the industry output increases, often due to the inputs' prices rising as demand for them grows.