1. Financial economics is the study of ________. allocation of resources over ti
ID: 2813633 • Letter: 1
Question
1. Financial economics is the study of ________.
allocation of resources over time with risk
income distributions
poverty
scarcity of natural resources
2. What you must forego to obtain some item is called your ________.
opportunity cost
explicit cost
implicit cost
direct cost
3. The property of diminishing marginal returns says that ________.
the total benefit of capital declines
an additional unit of any input leads to fewer and fewer additional units of output
income declines as we get older
the marginal benefit of an additional unit of capital investment increases as we use more of it
4. Economic profits are calculated as ________.
economic costs minus accounting costs
revenue plus expenses
revenue minus expenses
accounting profit minus opportunity costs
Explanation / Answer
1)Financial economics is the study of allocation of resources over time with risk.
Financial economics is a branch of economicsthat analyzes the use and distribution of resources in markets in which decisions are made under uncertainty.
Therefore answer is option (a)allocation of resources over time with risk.
(2)Opportunity cost represents the benefits an individual, investor or business misses out on when choosing one alternative over another.
Therefore answer is option(a) opportunity cost
(3) The property of diminishing marginal returns says that an additional unit of any input leads to fewer and fewer additional units of output.
Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.
Therefore answer is option (b)
(4)Economic profits are calculated as revenue minus expenses.
Revenue is income from selling a firm's product; defined as price times quantity sold. Accounting profit is the total revenues minus explicit costs, including depreciation. Economic profit is total revenues minus totalcosts—explicit plus implicit costs.
Therefore answer is option (c)
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