Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-1, if the market is in equilibrium, then ____ represents total surplus.

An investor will generally find that hiring an investment firm to actively manage his or her portfolio will

A) result in a higher return than would be received from an index mutual fund. B) be less expensive than simply placing money in an index mutual fund. C) result in a higher return, but will be more expensive than placing money in an index mutual fund. D) result in about the same return, but be more expensive than placing money in an index mutual fund.

Estimation by WLS

A) although harder than OLS, will always produce a smaller variance. B) does not mean that you should use homoskedasticity-only standard errors on the transformed equation. C) requires quite a bit of knowledge about the conditional variance function. D) makes it very hard to interpret the coefficients, since the data is now weighted and not any longer in its original form.