To reduce the principal-agent problem
A) boards-of-directors can tie the salaries of top management to the profitability of the firm.
B) managers can inflate profits on financial statements.
C) managers can take on more risk than they disclose to investors.
D) managers can hide liabilities by not disclosing them on financial statements.
A
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For building contractors, doubling the size of an office building does not require double the inputs because there are common walls. This is an example of
a. increasing marginal product b. diminishing marginal returns c. economies of scale d. diseconomies of scale e. constant returns to scale
Protectionism arises because
a. people misunderstand the benefits of free trade b. trade generally harms some groups in society c. the costs of free trade outweigh the benefits for all groups in society d. the costs of trade for both exporting and importing nations outweigh the benefits e. of a lack of comparative advantage
The value of the marginal product is
a. total revenue minus total cost. b. the change in total output divided by the change in an input. c. the marginal product of an input times the price of the output. d. total output divided by total inputs.
If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in deposit creation of:
A. $10 million. B. $90 million. C. $9 million. D. $900,000.