Consider the Following Two Statements: (I) If Markets Are Strong

question 42

Multiple Choice

Consider the following two statements: (i) If markets are strong form efficient, the only reason that prices change is because there is news.
(ii) In strong form efficient markets, investors can ignore their risk exposure.

• A)(i) is correct, (ii) is incorrect.
• B)(ii) is correct, (i) is incorrect.
• C)Both (i) and (ii) are correct.
• D)Both (i) and (ii) are incorrect.
• E)In strong form efficient markets, prices do not change.

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Definitions:

Monopolistically Competitive

Describes a market structure in which many firms sell products that are similar but not identical, allowing for some degree of market power.

Economic Profits

A rephrased definition: The surplus achieved by a firm after accounting for both the operating expenses and the opportunity costs of all resources employed.

Monopolistically Competitive

A market structure featuring many firms selling products that are similar but not identical, allowing for some degree of market power and price setting.

Long Run

A period in economics during which all factors of production and costs are variable, allowing firms to adjust all inputs.