Economics Today: The Micro View (18th Edition)
Economics Today: The Micro View (18th Edition)
18th Edition
ISBN: 9780133885071
Author: Roger LeRoy Miller
Publisher: PEARSON
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Chapter 2, Problem 18P
To determine

Production Possibilities Frontier:

The production possibilities frontier or PPF indicates the production possibilities of two commodities when the resources are given. This means when one commodity’s production can be increased only when the other commodity production is reduced. Hence, the PPF analyses the efficiency in which the two commodities can be produced together.

Consumption goods:

These are the final goods that are consumed by consumer for which he or she derives satisfaction or utility;

Capital goods:

These are goods that are used in producing other goods, rather than bought by consumers. These serve as intermediate goods that help in the production process.

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1. A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate fund, and the third is a (riskless) T-bill money market fund that yields a rate of 8%. The probability distributions of the risky funds have the following characteristics: Standard Deviation (%) Expected return (%) Stock fund (Rs) 20 30 Bond fund (RB) 12 15 The correlation between the fund returns is .10.
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