The concept of adverse selection helps to explain
A) why collateral is not a common feature of many debt contracts.
B) why large, well-established corporations find it so difficult to borrow funds in securities markets.
C) why financial markets are among the most heavily regulated sectors of the economy.
D) why stocks are the most important source of external financing for businesses.
C
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Suppose the only characteristic of beer that a consumer cares about is alcohol content. Currently, Bud Light and Miller Lite have the same alcohol content.
a. Using 
to denote ounces of Miller Lite and 
to denote ounces of Bud Light, what's the simplest possible utility function that can describe this consumer's tastes over the two products.
b. Suppose Bud Light
lowers its alcohol content by 50%. How would you change the utility function to account for this? c. Derive the MRS for the functions in (a) and (b) --- and interpret your answer. What will be an ideal response?
An example of physical capital is:
A. a construction worker's strength. B. a scientist's knowledge of cellular biology. C. Both of these are examples of physical capital. D. Neither of these is an example of physical capital.
At a profit-maximizing output level,
a. marginal revenue minus marginal cost equals zero. b. marginal profit equals zero. c. the slope of the total profit curve is zero. d. All of the above are true.
If real GDP for 2009 is $6400 billion (in 2012 dollars) and nominal GDP for 2010 is $6720 billion, then the growth rate of real GDP is
A. unknown based on the given information. B. 5%. C. 0%. D. 0.5%.