We may not be able to fully remove risk by diversification if:
A) a completely risk-free asset does not exist.
B) the asset returns in our portfolio are positively correlated.
C) buying stock on margin is not allowed by financial regulators.
D) none of the above
B
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Using the scenario above why might the results be different for small classes compared to large classes?
What will be an ideal response?
Suppose a city has 20 citizens. The first 10 citizens each derive marginal benefit from traffic lights according to the function MB = 10 - Q, and the remaining 10 citizens each derive marginal benefit from traffic lights according to the function MB = 20 - Q. If traffic lights cost $20 each to produce, what is the efficient quantity of traffic lights?
A) 14 traffic lights B) 16 traffic lights C) 12 traffic lights D) 9 traffic lights