Why might stockholders be upset to find out that their company's profits that otherwise would have been distributed as dividends are instead invested in U.S. Treasury bonds?

What will be an ideal response?


They would be upset because those same investors could have taken those profits and done the same thing with them on their own or better. The only instance when it would be appropriate for the company to retain the earnings is when the rate of return on the profit is likely to be higher than what investors could reasonably be expected to earn on their own had the profits been distributed as dividends instead.

Economics

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A decrease in the price of a commodity results in a(n)

a. decrease in supply b. decrease in quantity demanded c. increase in demand d. decrease in quantity supplied e. increase in supply

Economics

Economies with high growth rates tend to be those that have:

A. large amounts of natural resources. B. a stable government that protects property rights. C. high levels of government regulation. D. a large defense budget.

Economics

If the Federal Reserve conducts an open market purchase, the:

A. interest rate will not change. B. interest rate will increase. C. interest rate will decrease. D. money supply is decreased.

Economics

Which of the following markets best illustrates the practice of price discrimination?

A. The airline market. B. Wheat farming. C. The personal computer market. D. The fast-food market.

Economics