Both Screening and Signaling

question 24

Multiple Choice

Both screening and signaling:

• A) correct inefficiency in the market.
• B) allow more transactions to take place that are valuable to buyers and sellers.
• C) can increase surplus gained in a market.
• D) All of these statements are true.

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Definitions:

Prices

The amounts of money expected, required, or given in payment for something.

Efficient Markets Hypothesis

The theory that all available information is already reflected in securities prices, implying that stocks always trade at their fair value.

Actual Capital Markets

Refers to live, operational markets where securities, debts, and equities are traded and capital is allocated in real time.