Normative Economic Analysis

question 36

Multiple Choice

Normative economic analysis

• A)involves the study of what comprises a normal firm.
• B)involves how resources are actually used in an economy.
• C)involves judgments on how resources should be used in an economy.
• D)is usually thought to be a waste of time.

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Definitions:

Noise Trader

An investor who makes buy and sell decisions without the use of fundamental data, contributing to market volatility.

Aversion to Ambiguity

Aversion to ambiguity refers to an individual's tendency to avoid choices or decisions when information is unclear or incomplete, reflecting a preference for certainty.

Limits to Arbitrage

The constraints that prevent traders from exploiting price discrepancies in financial markets, thus allowing inefficiencies to persist longer than they would otherwise.

Trading Volume

It denotes the total number of shares or contracts traded for a specific security or market during a given period.