Prospect Theory Is Based on the Concept That Investors Are

question 81

Multiple Choice

Prospect theory is based on the concept that investors are:

• A) always risk takers.
• B) risk-adverse regarding losses.
• C) risk-taking regarding losses.
• D) always risk-averse.
• E) neutral regarding risk.

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Definitions:

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing excess returns over the firm's opportunity costs.

Purely Competitive Market

A trading environment with a large number of consumers and providers, barrier-free entrance and departure, and a standardized product.

Long-run Equilibrium

A state where all factors of production in an economy are utilized efficiently, market supply equals demand, and no economic forces are pushing for change.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing excess revenue over the opportunity cost of resources employed.