The efficient market hypothesis suggests that:
A. asset price bubbles are efficient.
B. irrationality must a part of every economic model.
C. while individuals can be irrational, collectively they will not.
D. because individuals are rational, collectively they are also rational.
Answer: C
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Answer the following statement(s) true (T) or false (F)
1. A Pigou tax forces car manufacturers to internalize the cost of pollution. 2. Cap and Trade is so named because the government puts a “cap” on the amount of exports that domestic firms are allowed to “trade” with foreign nations. 3. A Cap and Trade system is more prone to error than a Pigou tax. 4. Pigou taxes are unnecessary in the presence of transaction costs. 5. Pigovian analysis indicates that a subsidy should be awarded when economic activity creates social benefits.
The financial sector of an economy includes which of the following components?
A) strengthening payment systems and regulatory agencies B) strengthening financial sector institutions C) attracting global capital and domestic savings D) both A and B
Two variables that systematically change together are correlated.
Answer the following statement true (T) or false (F)
When economists say the supply of a product has decreased, they mean that:
A. the supply curve has shifted to the left. B. the product price has decreased, and as a consequence, suppliers are producing less of the product. C. producers are now willing to sell more of this product at each possible price. D. the supply curve has shifted to the right.