Moral hazard is not eliminated in debt financing because
A) borrowers have an incentive to assume greater risk than is in the interest of the lender.
B) firms with a great deal of debt often go bankrupt.
C) principal-agent problems are greater with debt financing than with equity financing.
D) the use of restrictive covenants tends to increase moral hazard.
A
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Which of the following is a key characteristic of economic freedom?
a. institutions and policies supportive of voluntary exchange b. freedom to compete c. protection of people and their property from aggressors d. all of the above
A tax on buyers shifts the demand curve and the supply curve
a. True b. False Indicate whether the statement is true or false
Real-world markets:
A. ensure that sellers will always be honest and provide accurate information because those who are dishonest or provide inaccurate information go out of business. B. can operate efficiently only if government takes steps to correct informational problems. C. provide no mechanism for solving informational problems. D. often involve deception, cheating, and inaccurate information.
Taxes can be used to internalize negative externalities.
Answer the following statement true (T) or false (F)