Based on Your Understanding of Your Roommate's Preferences, You Predict

question 40

Multiple Choice

Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?

• A) Your roommate is irrational.
• B) Your roommate does not know what is in his own best interests.
• C) You roommate does not know his own preferences as well as you do.
• D) You constructed a model that made a prediction, and the prediction was refuted.

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Definitions:

Outstanding Common Stock

Refers to the shares of a corporation that have been issued and are currently owned by investors, including public shareholders and company insiders, but excluding shares owned by the corporation itself.

Cash Dividend

A distribution of a company's earnings to its shareholders in the form of cash.

Balance Sheet

A financial statement that summarizes a company's financial position at a certain point in time, including assets, liabilities, and shareholders' equity.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the value of a company's shares.