The scandals involving Enron, World Com, Global Crossing and other large firms:
A. have resulted in a cry for less government regulation of public corporations.
B. demonstrate that the government should be responsible for collecting and distributing financial information on firms.
C. is what should have been expected on the part of investors, that is why there is a risk premium.
D. are examples of asymmetric information and have led, at least temporarily, to a less well functioning stock market.
Answer: D
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If a natural monopoly is told to set price equal to average cost, then the firm
A) is not able to set marginal revenue equal to marginal cost. B) automatically also sets price equal to marginal cost. C) will make a substantial economic profit. D) will incur an economic loss. E) sets a price that is lower than its marginal cost.
Office Paper is an office supply firm. If the managers of Office Paper sell 10,000 boxes of staples a year and each order contains 1,000 boxes of staples, how many orders will the managers submit a year?
A) 10,000 B) 1,000 C) 100 D) 10
Suppose you live in the suburbs and dump your garbage on your front lawn on a daily basis.
A. Your actions hurt no one but yourself. B. Your actions constitute an external cost to your neighbors. C. Your actions constitute an external benefit to your neighbors. D. Your actions would not be considered a market failure.
In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds
a. only if the asset is located at home. b. only if the asset is located abroad. c. whether the asset is located at home or abroad. d. None of the above is correct.