Stocks appear to present risk, yet many people have substantial parts of their wealth invested in them. This behavior could be explained by:
A. investing in stocks over the long run is not as risky as short-term holdings of stocks
B. people are not very risk-averse and do not require a risk premium for stocks.
C. people are not efficient users of information.
D. people are irrational in their investment behavior, only focusing on positive outcomes.
Answer: A
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Refer to the above figure. At an income of $10,000, saving is
A) 0. B) $13,000. C) $3,000. D) -$3,000.
A manager invests $400,000 in a technology that should reduce the overall costs of production. The company managed to reduce their cost per unit from $2 to $1.85 . After the investment has been made, the $400,000 investment is
a. Considered sunk costs, not relevant in further decision making b. Considered sunk costs, but still relevant in further decision making c. Considered a loss d. Considered a profit