The Efficient Markets Hypothesis Implies

question 11

Multiple Choice

The efficient markets hypothesis implies

• A)that all stocks are fairly valued all the time and that no stock is a better buy than any other.
• B)that all stocks are fairly valued all the time,but that some stocks may be better buys than other.
• C)that some stocks may be better buys than others and stock experts can determine which ones.
• D)that no stock is efficiently valued.

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Definitions:

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others.

Trade

Trade involves the exchange of goods or services between parties, which can be within a country or between countries.

Resources

Economic or productive factors required to accomplish an activity, or to provide a service or product, such as land, labor, and capital.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen; the value of the next best alternative foregone.