When is a firm more likely to engage in excessively risky behaviors, when business is well, or when it is facing financial distress?
What will be an ideal response?
Financial distress is a cause of moral hazard. Even heretofore prudent managers are tempted to take drastic action with the hope that a big payoff might save the company, and the realization that, if the company is about to fail, there's little to lose by taking big risks. Moreover, managers are understandably reluctant to reveal bad news, and the move away from transparency encourages behaviors that would be dismissed as unacceptable if they were easily observable.
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Which of the following is likely to shift the credit demand curve of a computer manufacturer to the left, assuming all else equal?
A) An increase in the scale of production B) A decrease in the scale of production C) An increase in the real interest rate D) A decrease in the real interest rate
For an individual who consumes only two goods, x and y, the opportunity cost of consuming one more unit of x in terms of how much y must be given up is reflected by:
a. the individual's marginal rate of substitution. b. the market prices of x and y. c. the slope of the individual's indifference curve. d. none of the above.
Production costs for a given output will be minimized when the
a. budget line and the product indifference curve meet in the vertical axis. b. budget line crosses the product indifference curve. c. budget line begins to bend back on itself. d. product indifference curve and the budget line are tangent.
On May 12, 2011, it cost U.S. $1.44 to buy one euro. How many euros would U.S. $1 buy?
a. 0.69 b. 1.44 c. 1.69 d. 2.44