Consider the Market for Apples

question 51

Multiple Choice

Consider the market for apples. Assuming that apples and oranges are substitutes, an increase in the price of oranges will:

• A) decrease the demand for apples, creating a lower price and a smaller amount of apples purchased in the market.
• B) increase the demand for apples, creating a higher price and a greater amount of apples purchased in the market.
• C) decrease the supply of apples, creating a higher price and a smaller amount of apples purchased in the market.
• D) increase the supply of apples, creating a lower price and a greater amount of apples purchased in the market.

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Definitions:

Market Beta

A measure of the volatility of a security or a portfolio in comparison to the market as a whole.

Explanatory Power

The ability of a statistical model to account for the variability of a given data set, explaining how well the model represents the data observed.

Fama and French

Economist researchers known for their development of a three-factor model to explain stock returns based on market risk, size, and book-to-market value factors.

Firm Size

A measure of a company's size, often determined by its market capitalization, number of employees, or total assets.