In the 1990s, several stocks had very, very high price to earnings ratios. These stocks appeared overvalued to many observers. What might the people who bought them have been thinking?
There are several possibilities. The first is that they had very high expectations for corporations that weren't doing well at the time to do very well in the future. The second is that in evaluating the value of stocks they took into account what others might be willing to pay for them in the future. Even if they thought that the corporation might never be profitable, they might have believed that other people would be willing to pay a lot for it in the future. Another possibility is that people became overconfident in their ability to pick stocks in a rising stock market. This overconfidence may have led buyers to bid up prices.
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Refer to Scenario 17.2. The highest level of y* that can be set and still have the high-productivity people choose to meet it is
A) 90. B) 60. C) 30. D) 22.5. E) 15.
In the long run, the economy is better off if policymakers exploit the short-run trad-eoff between inflation and the unemployment rate
a. True b. False Indicate whether the statement is true or false
Supporters of globalization believe that free trade and international investment result in all countries raising their living standards
a. True b. False Indicate whether the statement is true or false
To maximize profits, a perfectly competitive firm should do all the following except:
A. produce until marginal cost equals price. B. produce until per-unit profits are maximized. C. produce until marginal revenue equals marginal cost. D. produce until economic profits are maximized.