Lewis has $5,000 worth of bonds in Farrell’s Seed Company. Bonnie has 10,000 shares of preferred stock in the company, Jeff has 100,000 shares of common stock, and Val has 1 share of common stock. If Farrell’s Seed Company goes out of business, which obligation will it be required to meet first?
a. paying Bonnie the full value of her preferred stock
b. paying Jeff the dividends on his common stock
c. paying Lewis the full value of his bonds
d. paying Val the full value for her share of common stock
c. paying Lewis the full value of his bonds
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In a market economy, what encourages firms to develop new products and production processes?
A) contracts B) insurance C) patents D) accounting rules
In a given market, a large number of firms sell a similar product. Consumers think that each firm's product is somewhat different from that of its competitors. This market is
A) perfectly competitive. B) monopolistically competitive. C) equivalent to a monopoly because consumers think the products are different. D) equivalent to an oligopoly because consumers think the products are different.
If price is between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is
A) raise prices. B) lower prices to gain revenue from extra volume. C) shut down immediately, but not liquidate the business. D) shut down immediately and liquidate the business. E) continue operating, but plan to go out of business.
The government should set the price for natural monopolies at their:
A. average total cost. B. marginal cost. C. average variable cost. D. fixed cost.