Holding the Mean Constant, the Larger the Standard Deviation, the ____________

question 70

Multiple Choice

Holding the mean constant, the larger the standard deviation, the ____________ the gamble will be.

• A) more risky
• B) less risky
• C) higher utility
• D) None of the statements is correct.

Calculate and understand the variance in investment returns.

Understand the difference between arithmetic and geometric average returns.

Calculate and interpret dividend yield.

Understand the concept and calculation of the bullwhip effect in supply chains.

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Definitions:

Externalities

Externalities are unintended side effects of economic activity affecting third parties not directly involved in the transaction, which can be either positive or negative.

Pollution Permits

Legal rights granted by governments to emit a specific amount of pollutants into the environment.

Corrective Tax

A tax designed to incentivize socially desirable behavior, often used to correct for the negative externalities of an action or consumption.

Coase Theorem

A principle that asserts that if private parties can bargain over the allocation of resources without cost, they can solve the problem of externalities on their own.