Which of the following is an example of how incentive structures contributed to the collapse of investment banks?
a. The bonus structures of most executives were tied to short-term profitability.
b. The rating agencies acted independently in assigning ratings to mortgage-backed securities and had no incentive to understate the risks.
c. Mortgage-backed securities were closely scrutinized in order to minimize risk and obtain higher ratings.
d. Despite SEC regulations, investment banks kept leverage ratios low in order to increase profits.
A
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If a mutual fund outperforms the market in one period, evidence suggests that this fund is
A) highly likely to consistently outperform the market in subsequent periods due to its superior investment strategy. B) likely to under-perform the market in subsequent periods to average its overall returns. C) not likely to consistently outperform the market in subsequent periods. D) not likely to outperform the market in any subsequent period.
The U.S. Postal Service has found its monopoly eroded over time because
a. the demand for mail delivery has become more inelastic b. Congress has taken away their monopoly over first-class mail c. the U.S. Postal Service cannot handle the volume of transactions d. the price of stamps has increased relative to other substitutes, such as the telephone, email, and online transactions e. of the decline in the use of fax machines
Which market-oriented environmental policy tool works best when millions of users emit small amounts of pollution?
a. Marketable permits b. Property rights definitions c. Pollution charges d. Command-and-control
In the context of the environment, the type of transactions costs that includes sampling the emissions of many companies to determine which company or companies are emitting pollution are called
A) search costs. B) collectivization costs. C) negotiation costs. D) monitoring and enforcement costs.