The principal-agent problem of ownership vs. control of the corporation tends to get worse when
A) stock in a corporation is held exclusively by a small number of people who control the company's day-to-day operations.
B) stock in the company is tightly held, but there are some "outsider" stockholders.
C) stock in the company is very diffusely held, with no individual or group having control over a large block of stock.
D) managers have profit-sharing schemes as part of their incentive package.
E) managers focus on maximizing the firm's profits, rather than the firm's market share.
C
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When a recessionary gap exists, actual output ________ potential output and the rate of inflation will tend to ________.
A. is less than; decrease B. is less than; increase C. exceeds; increase D. exceeds; decrease
Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost. Compared to a town in which all residents collectively decide on how much water to use, water use will likely be ________ in Dry Gulch.
A. higher B. the same C. the same or lower D. lower
Recall the Application about the free-agent market for professional baseball pitchers to answer the following question(s).Recall the Application. Baseball players who switch teams are more likely to suffer from injuries because the player's ________ team has superior information concerning the health of the player and, if they believe the player will be prone to injury in the future, they ________ be willing to outbid another team.
A. new; will not B. old; will not C. new; will D. old; will
A farmer buys seed for 15 cents that is used to grow wheat. The farmer sells the wheat to the miller for 30 cents, who makes flour. The flour is sold to the baker for 60 cents and the baker makes bread, which is sold to the grocer for 90 cents. The grocer sells the bread for $1.40. What is the value added for the grocer?
A. 15 cents B. $1.40 C. 50 cents D. 35 cents