In an Efficient Market

question 130

Multiple Choice

In an efficient market:

• A)it is fairly easy to find stocks whose prices do not fairly reflect the present value of future expected cash flows
• B)unexpected news will cause a rapid change in prices
• C)information flows are random, both in timing and in content
• D)all the above

Recognize the principles of perfect competition and how they lead to efficient resource allocation.

Understand the role of marginal cost and opportunity cost in economic decision-making.

Explore the impact of market dynamics and policy changes on welfare and equity.

Distinguish between market structures and their implications for output, pricing, and efficiency.

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Definitions:

Enforceable Oral Contracts

Verbal agreements that are recognized by law as binding, provided they meet certain criteria and are not for purposes requiring written contracts under the statute of frauds.

Substitute

An alternative or replacement for something else, often found or used when the original is unavailable or unsuitable.

Extend

To prolong the duration of something or to reach out in space or time.

Course of Dealing

A pattern of actions between parties that establishes a common basis for understanding in future transactions.