The Vanguard 500 Index Fund Tracks the Performance of the S&P

question 77

Multiple Choice

The Vanguard 500 Index Fund tracks the performance of the S&P 500. To do so, the fund buys shares in each S&P 500 company ________.

• A) in proportion to the market value weight of the firm's equity in the S&P 500
• B) in proportion to the price weight of the stock in the S&P 500
• C) by purchasing an equal number of shares of each stock in the S&P 500
• D) by purchasing an equal dollar amount of shares of each stock in the S&P 500

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Definitions:

Returns to Scale

The rate at which output increases as inputs are increased proportionately.

Economies of Scope

Cost advantages companies experience when they increase the variety of products produced, as opposed to increasing the volume of a single product (economies of scale).

Joint Cost Curve

Refers to a graph showing the costs shared by products in the process of being produced together up to a split-off point.

Economies of Scope

Cost advantages that enterprises obtain due to efficient resource utilization in producing a variety of products rather than specializing in a single product.