USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 127

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

-Refer to Exhibit 7.8. In the list above, which are NOT assumptions of the Arbitrage Pricing model?

• A) (1) and (3)
• B) (1), (2), and (3)
• C) (1), (2), and (5)
• D) (2), (4), and (6)
• E) (1), (2), (3), (4), (5), and (6)

---

Definitions:

Economic Profits

Profits that exceed the opportunity costs of all resources used by the firm, including both explicit and implicit costs.

Sunk Costs

Costs that cannot be recovered. They are unavoidable even in the long run.

Economic Environment

The economic environment consists of all the external economic factors that influence buying habits, business operations, and growth prospects of entities.

Economic Profits

The discrepancy between total income and overall expenses, encompassing all direct and indirect costs.