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Consider an economy with two types of firms, S and U. The S firms always move together, but U firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-The risk premium of a share is not affected by its
Total Output
The aggregate quantity of goods or services produced in an economy or by a company during a specific period.
Fixed Costs
Costs that remain constant regardless of the amount of goods produced or units sold, including expenses like rent, wages, and insurance premiums.
Short Run
A period in economic analysis where at least one factor of production is fixed, limiting adjustments to changes in demand or supply.
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