Which of the Following Individuals Is Using Information Outsidethe Efficient

question 156

Multiple Choice

Which of the following individuals is using information outsidethe efficient markets hypothesis?
Someone who:

• A)has information about the aging U.S.population and expects stock for companies that cater to senior citizens to increase in
• Value.
• B)reads in the newspaper about a merger between two profitable firms and expects the stock prices for these
• Companies to rise.
• C)while auditing a dishonest company realizes that its profit estimates are greatly inflated and immediately sells her stock in
• The company.
• D)hears a rumor that a top bank may be in trouble, and decides to sell his stock in that company.

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Definitions:

Total Revenue

The total amount of money generated from the sale of goods or services.

Decrease

A reduction in quantity, size, intensity, or the number of something.

Equilibrium Price

The price at which the quantity of goods supplied equals the quantity of goods demanded, leading to market balance.

Perfectly Elastic

A situation where a small price change results in an infinite change in the quantity demanded or supplied.