It Is Believed by Some Individuals That, in an Efficient

question 48

Multiple Choice

It is believed by some individuals that, in an efficient market, the actions of traders who constantly buy and sell on any perceived market mispricing will in effect cause market prices to correctly reflect asset values. A person who believes that the actions of these traders will not result in correctly valued prices are most apt to believe in which one of the following?

• A) Gambler's fallacy
• B) Limits to arbitrage
• C) Availability bias
• D) False consensus
• E) Clustering illusion

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Definitions:

Osmosis

The movement of water molecules through a semipermeable membrane from a region of lower solute concentration to a region of higher solute concentration to equalize the concentrations on both sides of the membrane.

Active Transport

Transport of molecules across the membrane of a cell from areas where they are less concentrated to areas where they are more concentrated, which demands energy.

ATP

Adenosine triphosphate, a molecule that stores and transfers energy within cells, facilitating various biochemical processes.

Concentration Gradient

A difference in the concentration of a substance across a distance, which drives the passive movement of particles from an area of high to low concentration.