Shouldn't better informed investors be able to profit from the deviations from pricing efficiency caused by noise traders?
What will be an ideal response?
Better informed investors may be able to profit from the deviations from efficiency caused by noise traders. But the longer these deviations persist, the less likely it is that better informed investors will be able to profit.
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Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes
or complements?
In 2012 a severe drought raised the price of corn. For a farmer in Canada who harvested a normal crop because the farm was not affected directly by the drought, the increase in the price of corn
A) increases the farmer's producer surplus. B) decreases the farmer's producer surplus. C) does not affect the producer surplus because this change is a movement along the farmer's supply curve and not a shift of the farmer's supply curve. D) increases producer surplus only if the farmer's supply is completely inelastic.
In the market for insurance,
A) buyers often have more information than sellers. B) sellers are protected from lawsuits brought by buyers. C) demand is perfectly inelastic because, by law, home owners and automobile drivers must have insurance. D) sellers often have better information than buyers.
Firms in a monopolistically competitive industry maximize profits by
a. equating total revenue and total cost b. treating price as given and maximizing output c. minimizing costs d. producing the level of output at which MR = MC e. producing the level of output at which TR = TC