Many people consider lump-sum taxes to be unfair to low-income taxpayers
a. True
b. False
Indicate whether the statement is true or false
True
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According to the Gordon-Growth model, if the stock price is $21, required return on equity is 10% and the current dividend is $1, what is the expected growth rate of dividends?
A) 2% B) 5% C) 10% D) 15%
An example of moral hazard is
a. A taxi driver paid per mile taking a longer route than necessary b. a piece-rate garment worker shirking more than a per hour worker c. an hourly salesman working harder than a commission salesman d. an author on contract going to as many book signings as one with a percentage royalty rate
The Rand Corporation estimates that the external costs imposed by alcohol consumption (for example, deaths caused by drunk drivers) to be 48 cents per ounce consumed. Taxes on alcohol amount to 23 cents per ounce consumed. This information suggests: (i) alcohol is overconsumed; (ii) alcohol taxes should be raised. Which of these statements is correct?
a. i and ii b. i not ii c. ii not i d. neither i nor ii
Arbitrage equalizes rates of return across similar investments because:
A. arbitrage also equalizes the prices of the assets. B. investors prefer diversity. C. investors will want to replace lower rate of return assets with those generating higher rates of return. D. investors will want to replace higher rate of return assets with those generating lower rates of return.