What are some reasons that hedge funds have become controversial?
What will be an ideal response?
First, while mutual fund managers typically charge the fund a fee for managing it, hedge fund managers also receive a share of any profits the fund earns. A typical hedge fund charges investors a fee of 2% of the value of the fund's assets plus 20% of any profits the fund earns. Second, several hedge funds have experienced substantial losses that led to potential risk to the financial system. Finally, hedge funds have come under criticism for their heavy use of short selling. Short selling can cause security prices to fall by increasing the volume of securities being sold.
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Without successful bargaining, economic efficiency will not be achieved when there is a negative externality because
A) too much of the good will be produced. B) too little of the good will be produced. C) economic surplus is being maximized. D) the externality causes consumer surplus to exceed producer surplus.
A survey made by Starc Motors reveals that the attrition rate for specialized workers is very high. In order to reduce attrition and increase productivity, the CEO of Starc Motors decides to pay the workers more than what market conditions dictate. The policy adopted by this company is based on the _____
a. efficiency wage theory b. model of option pricing c. insider-outsider model d. relative wage coordination argument
American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. Which country has a comparative advantage in producing cars? In producing grain?
a. U.S in cars; Japan in grain b. Japan in cars; U.S in grain c. U.S in cars; U.S in grain d. Neither in cars; U.S in grain
The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?
A. Shut down and produce zero sandwiches because price is less than AVC. B. Continue to produce because price exceeds AFC. C. Decrease production so that AVC will decrease. D. Increase production so that AFC will decrease.