Which of the Following Is a True Statement About Diversification

question 62

Multiple Choice

Which of the following is a true statement about diversification?

• A) It will increase your overall risk.
• B) It will increase your volatility.
• C) It will decrease the number of investments in your portfolio.
• D) It will increase your chances of obtaining your financial goals.

---

Definitions:

Single Price

A market condition where a good or service is sold at the same price to all customers, regardless of purchase quantity or location.

Nondiscriminating Monopolist

A monopolist that charges the same price to all customers, as opposed to engaging in price discrimination where different prices are charged to different customers.

Natural Monopoly

A market condition where due to high fixed or startup costs, a single firm can supply a good or service to an entire market at a lower cost than multiple companies.

Network Effects

Increases in the value of a product to each user, including existing users, as the total number of users rises.