Multiple Choice
Milton Friedman argued that consumers are more likely to alter their behavior based on:
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
People invest in the stock market because:
A
Investing in the stock market eliminates all financial risks.
B
Stock market investments always guarantee a fixed return regardless of market conditions.
C
They are required by law to invest a portion of their income in stocks.
D
They expect the value of their investments to exceed their willingness to pay, resulting in consumer surplus.
Verified step by step guidance1
Understand the concept of consumer surplus in the context of investment: Consumer surplus occurs when the value or benefit an investor expects from an investment exceeds the cost or price they pay for it.
Recognize that investing in the stock market involves risk and uncertainty, so it does not eliminate all financial risks nor guarantee fixed returns regardless of market conditions.
Acknowledge that there is no legal requirement forcing individuals to invest a portion of their income in stocks, so this is not a reason for investing.
Identify that the primary motivation for investing in the stock market is the expectation that the returns (value) from the investment will be greater than the amount they pay, creating a positive net benefit or consumer surplus.
Summarize that people invest because they anticipate gaining more value from their investments than the cost, which aligns with the concept of consumer surplus in microeconomics.
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