With No Additional Information, an Investor Expects a Monetary Value

question 67

Multiple Choice

With no additional information, an investor expects a monetary value of $2,840 through her investment choices.Additional information on the likelihood of a strong stock market would cost $800.With that additional information, the investor can expect a monetary value of $3,610.The investor ___________ purchase the additional information as after paying for the information, the expected monetary value would be ________.

• A)should not; -$30
• B)should; $800
• C)should not; -$800
• D)should; 3,610
• E)should; $30

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Definitions:

Income Effect

The change in the quantity of a good consumed that results from the change in a consumer’s purchasing power due to the change in the price of the good.

Substitution Effect

The adjustment in consumer behavior because of shifts in the prices of goods relative to each other, causing consumers to choose different goods over previously preferred ones.

Normal Good

A good whose demand increases as consumer income increases, demonstrating how economic well-being influences consumer choices.

Child Tax Credit

A tax benefit offered to families with children, providing a reduction in their tax liability per child.