In which of the following markets do you expect efficient outcomes? Why?

a. Flood insurance for beach houses

b. Medical care

c. Stock market

d. Personal computers

e. Loans for students who wish to attend college

f. Car insurance

Stock market:
A place wherein public organizations trade their shares and stocks is known as a stock market.
Organizations trade these shares in the market through an initial public offering (IPO) for the
sake of raising capital.

Answer and Explanation:

An efficient outcome is the outcomes that an investor targets while investing the capital. The
different markets have their own trends of performances.

Hurricane or flood insurance for the beach homes:

As hurricane is a natural phenomenon and occurrence factor of the same is almost predictive
losses occurring from the same is always under control of the local government, only houses
close to the beaches have a severe effect.

Hence the outcome from this insurance is efficient.

Medical care:

The medical insurance market is a typical high demand market.

Considering the ratios of medical insurance holders against the claimers, it seems to be a more
efficient market even after the exploitation of the sum insured amount by the physicians.

Stock market:

The stock markets have a long-standing trend of good outcomes.

Ample numbers of buyers and sellers in the stock market keep moving the market more
efficient.

Personal computers:

This works efficiently and with good growth. There exists a good dealing of competition and
information for computers and laptops. Some organizations dealing in this particular business
use market power by spreading brand awareness and proprietary systems.
Loans for students who wish to attend college:

After the studies, the student will really payback or default is not clearly stated or visible

A student loan is a fairly disruptive market as loan repayment is delayed until the student
finishes the studies he or she has opted for. Students tend to choose courses that won't yield in
the future, resulting in default payments of the loan.

Hence, this market purely depends on local governing bodies to intervene in the case of
default. And being the major reason for poor outcomes.

Car insurance:

This has good outcomes as they are usually paid against the mortgage of the car; hence even
after the default of payment, financial institutions are likely to receive basic invested money.

Hence, the correct option C. Stock market

As, stock market has efficient outcome. As both buyer and sellers are receive the benefit on the
money invested.