A risk premium is additional interest, in excess of the market rate, that a bondholder receives in order to compensate him for
a. systematic risk.
b. inflation.
c. default risk.
d. the bond discount.
c. default risk.
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Optimal decisions take into account
A. the resources available. B. the alternatives that were not available to choose. C. the gratification produced by an outcome. D. the effect on the distribution of income. E. the outcomes that are not feasible.
Suppose that with two fro-yo machines, 12 workers produce eight quarts of fro-yo. If the marginal product of the thirteenth worker is two quarts, then
a. thirteen workers produce ten quarts b. thirteen workers produce two quarts c. the thirteenth worker alone produces ten quarts d. the law of diminishing returns cannot be operating in this example e. diminishing returns must begin with the thirteenth worker
The cost disease of the service sector is evidenced by
a. a failure of the market mechanism. b. increased quality of public and private services. c. dramatic increases in municipal budget burdens for education, health care, and police and fire protection. d. the increased productivity in the services area.
Which of the following is an outside incentive that forces managers to put forth maximal effort?
A. Reputation B. Incentive contracts C. Flat fees D. Performance bonuses