Investment in Musical Acts Signing new music acts can be highly speculative. Record producers at music studios have to get budget approval before they sign a new act to a recording deal. Most acts perform a tried and true form of popular music in which
record sales can be pretty well predicted. However, once they get approval for their budgets, why do producers sometimes sign riskier acts who either flop or "break-out" into the next sensation?
This is a moral hazard issue. Record producers are investing other people's money and so have an incentive to switch to riskier investments once the funding has been secured. If the risky act flops, the company loses the money. If it succeeds, they get credit for discovering the new sound.
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The investment by firms in the creation of products not yet available on the market is referred to as:
A) working capital. B) creative capital. C) innovation funds. D) research and development.
The U.S. both imports and exports significant quantities of
A. transportation equipment. B. computer and electronic products. C. petroleum and coal products. D. all of these.
If price is above the long-run competitive equilibrium level,
A. Firms will enter the market. B. Firms will incur losses. C. Firms will shut down. D. The market supply will shift to the left.
The marginal cost curve always intersects the average total cost curve at the point at which the average total cost curve
A. is zero. B. is at its maximum. C. has a vertical slope. D. is at its minimum.