Which of the Following Statements Is False

question 97

Multiple Choice

Which of the following statements is false?

• A) In exchange for bearing systematic risk, investors want to be compensated by earning a higher return.
• B) A key step to measuring systematic risk is finding a portfolio that contains only unsystematic risk.
• C) When evaluating the risk of an investment, an investor will care about its systematic risk, which cannot be eliminated through diversification.
• D) To measure the systematic risk of a stock, we must determine how much of the variability of its return is due to systematic, market-wide risks versus diversifiable, firm-specific risks.

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one product for another.

Output Effect

The impact on total revenue when a firm alters its production level, influencing the quantity of goods sold and potentially the market price.

Fixed Proportions

A production process in which inputs are used in a constant ratio to each other, with no substitution possible between the inputs.

Labor Productivity

An indicator of economic efficiency that evaluates the quantity of goods and services produced (output) relative to the total hours spent in producing those goods and services.