Differentiate between a solvent bank and an insolvent bank. Which of the two is likely to have a greater stockholders' equity?
What will be an ideal response?
A bank is solvent when the value of the bank's assets is greater than the value of its liabilities. A bank becomes insolvent when the value of the bank's assets is less than the value of its liabilities.
Since stockholders' equity is defined as total assets of a bank less the total liabilities, a solvent bank is likely to have a greater stockholders' equity than an insolvent bank.
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Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ________ and the market equilibrium quantity will be ________.
A. inefficiently low; inefficiently high B. inefficiently low; inefficiently low C. inefficiently high; inefficiently low D. inefficiently high; inefficiently high
According to the economic theory of labor markets, if unions are successful in raising wages, with no accompanying increase in labor productivity, then which of the following is true?
a. The quantity of labor demanded by profit-maximizing firms will decline. b. The quantity of labor demanded by profit-maximizing firms will increase. c. The quantity of labor supplied by workers will decline. d. There will be a shortage of labor in the unionized labor market.
Which of the following is the outcome of the lemons problem in the used-car market?
A. No cars will be traded in the market. B. Only low-quality cars will be traded in the market. C. Only high-quality cars will be traded in the market. D. Both low-quality and high-quality cars will be traded in the market.
Labor productivity is defined as:
A. total output/worker-hours. B. nominal GDP minus real GDP. C. the ratio of real capital to worker-hours. D. the annual increase in nominal GDP per worker.