Which of the Following Statements Is True

question 7

Multiple Choice

Which of the following statements is true?

• A) It is easier for a person to optimize when he has less information.
• B) Optimization implies choosing the best option from a set of alternatives.
• C) People always successfully optimize given the limited information they have.
• D) Optimization is an easy process, and all economic agents are perfect optimizers.

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Definitions:

Return on Assets

A financial ratio that measures how efficiently a company uses its assets to generate net income, typically expressed as net income divided by total assets.

Return on Debt

An assessment of the profitability relative to the amount of debt used, often calculated as the interest rate or yield on the debt instrument.

Interest Tax Shields

The reduction in income taxes that results from taking allowable deductions for interest expenses.

Debtholders

Individuals or institutions that have lent money to a company through the issuance of bonds or loans.