Final answer:
The stock market has 'circuit breakers' to halt trading; a 10% drop doesn't shut it down for the day, and interest rates generally decline with a rise in financial market supply. Price decreases don't always lead to predictable changes in demand due to diminishing marginal utility.
Step-by-step explanation:
Market Trading Halts and Interest Rate Changes
Regarding the question about the percentage drop in stock required to shut down trading for the rest of the day, the correct answer is C) 10%. Stock market 'circuit breakers' or trading halts are triggered to prevent panic-selling on U.S. stock exchanges. The trading halt for the rest of the day occurs if the market drops by 20% before 1 pm, but there is no halt for the rest of the day at a 10% drop; trading would only pause for 15 minutes if it happens before 3:25 pm.
As for the scenario where a 10% decrease in price of a product results in an 8% increase in quantity demanded, economic principles suggest this may not always lead to another identical change in demand with a further price decrease. The concept of diminishing marginal utility implies that as consumers buy more of a product, the less additional satisfaction is derived from each unit, which might not result in a consistent 8% increase in demand for every 10% price drop.
Regarding interest rates, a rise in the supply of money, according to basic economic principles, tends to lead to a decline in interest rates. This is because with more money available to lend, the cost of borrowing that money (which is reflected in the interest rate) typically goes down.