The Jensen Portfolio Evaluation Measure

question 23

Multiple Choice

The Jensen portfolio evaluation measure

• A) is a measure of return per unit of risk, as measured by standard deviation.
• B) is an absolute measure of return over and above that predicted by the CAPM.
• C) is a measure of return per unit of risk, as measured by beta.
• D) is a measure of return per unit of risk, as measured by standard deviation, and is an absolute measure of return over and above that predicted by the CAPM.
• E) is an absolute measure of return over and above that predicted by the CAPM, and is a measure of return per unit of risk, as measured by beta.

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Definitions:

Nondiscriminating Pure Monopolist

A monopolist who sells their product at the same price to every customer, not charging different prices to different buyers.

Industry Demand Curve

A graph showing the relationship between the price of a good and the total amount of the good all consumers are willing to purchase within a specific industry.

Welfare or Efficiency Loss

The decrease in economic efficiency, often measured as the loss of consumer or producer surplus, due to deviations from perfect competition.

Marginal Revenue

The additional income gained from selling one more unit of a good or service; crucial for determining the optimum level of production.