How Does Imperfect Information Affect Market Decisions

question 28

Multiple Choice

How does imperfect information affect market decisions?

• A)It doesn't because information is generally excellent.
• B)It leads to inefficient outcomes in which expected benefits and actual benefits diverge.
• C)It leads to wasteful attempts to improve information.
• D)It leads to exploitation of sellers by buyers.

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Definitions:

Expected Return

The weighted average of all possible returns for an investment, considering the probabilities of each outcome.

Strike Prices

The specified price at which an option contract can be exercised, determining the buying or selling price of the underlying asset.

Stock Splits

A corporate action that increases the number of a company's shares by dividing each share, which typically reduces the share price.

Cash Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.