The Figure Given Below Shows the Demand [D and D']

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2

-The price of the Amazon.com stock was very high in the 1990s although the company never earned an economic profit. This demonstrates that:

A) investors' expectations of future profits alone influence the stock prices.
B) the performance of a firm has no bearing on stock prices.
C) stock markets are highly inefficient because investors vary in their risk appetites.
D) speculation based on wishful thinking by investors have a bearing on the stock prices.
E) investor expectations are generally rational.

Correct Answer:

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