
expenditure on the information. The point E at which the marginal cost curve MC
intersects the marginal gain curve MG, where MC=MG, is equilibrium of the
market. While the marginal gain exceeds the marginal cost on the left of point E,
the share traders would like to spend more on information. In contrast, when the
marginal gain is less than the marginal cost on the right of point E, share traders
prefer trading without further information gathering.
For the analysis on the relation of market equilibrium and market efficiency, a
dot line is vertically drawn from point C of Panel A to point E of Panel B. Figure
3.1 shows ...