How might government-directed credit help poor entrepreneurs to escape the "tyranny of collateral"? What side-effects might undermine the effectiveness of such a program?
What will be an ideal response?
A government run or influenced bank can ignore profit motivation and risk aversion to target underserved businesses on favorable terms involving little or no collateral. With competent screening, monitoring, and support services, the outcome can be profitable investments. The danger of moral hazard is acute, however. Markets achieve efficiency by removing resources from people and projects that are underperforming, but a program designed to be friendly to struggling businesses is unlikely to be good at recognizing lost causes and abandoning them. Moreover, the disregard of market standards makes it easy for the allocation of funds to be determined by political and social ties, to the detriment of economic performance.
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Increasing marginal returns occur when the
A) average product of an additional worker is less than the average product of the previous worker. B) marginal product of an additional worker exceeds the marginal product of the previous worker. C) marginal product of labor is less than the average product of labor. D) total output of the firm is at its maximum. E) total product curve is horizontal.
Suppose that a mutual fund, Washington Peak Strategic Bond Fund, believes it has hit upon a winning investment strategy.The fund uses an active management strategy to try to outperform the bond market
According to Washington Peak's prospectus, investors need to pay fees of 2 percent annually.Based on the historical success of their active investment strategy, the strategy is projected to generate annual returns (once fees are paid) of 8 percent. A friend of yours is considering investing in Washington Peak and asks you for investment advice. What would you suggest?
Total variable costs will initially increase and then begin to decrease as output increases.
Answer the following statement true (T) or false (F)
The tit-for-tat strategy is:
A. one in which a player in a repeated game takes the same action that his or her opponent did in the preceding round. B. one in which both players explicitly agree to compete in the first round of a repeated game, and if one of them cooperates, the other will defect. C. not effective in prisoner's dilemma type games. D. All of these statements are true.