A firms debt to equity ratio varies at times because
a. Take advantage of timing its fund-raising in order to minimize costs over the long run
b. Sell common stock when prices are high and bonds when interest rates are low
c. The market allows some leeway in the debt-to-equity ratio before penalizing the firm with a higher cost of capital.
d. All of the above.
Answer: d. All of the above.
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Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about
a. 1.5% in the short run and 6% in the long run. b. 6% in the short run and 1.5% in the long run. c. 16.7% in the short run and 4.2% in the long run. d. 4.2% in the short run and 16.7% in the long run.
A singer would willingly perform in a concert for $10,000. If she is paid $25,000 for the concert, she is
A) receiving $25,000 to cover her opportunity cost. B) not being paid her full opportunity cost. C) receiving $15,000 of economic rent. D) certainly being paid more than warranted by the level of demand.
When expectations are rational, prices and wages are, on average, set at market-clearing levels.
Answer the following statement true (T) or false (F)
Which of the following factors can contribute to a further reduction in the money supply in addition to a massive withdrawal of cash from banks?
A. Bank purchases of Treasury bonds from the Fed B. Bank sales of government bonds to meet liquidity demands C. Banks expand the approval and granting of loans D. A decrease in the required reserve ratio