The United States, the United Kingdom, Germany and Japan are all developed countries with highly developed and efficient financial markets. However, in all four countries the main source of business finance is internal funding. Why is this so?
What will be an ideal response?
The only possible explanation for this fact is that information problems make external financing either from markets or from financial intermediaries prohibitively expensive and difficult to get. The fact that managers have superior information about the way in which their firms are and should be run makes internal finance the rational choice. (Remember, this financing is not "free." The firm is giving up a rate of return it could have earned investing its funds in something besides its own business. Therefore, one could argue that the firm has superior information about its own business and therefore chooses investing in it over investing in other possibilities.)
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In-kind transfers include housing subsidies and food stamps.
Answer the following statement true (T) or false (F)
If the firm in Figure 7.3 produces at Q3, the firm
A. will receive less profits than if it produces at Q2. B. maximizes profits. C. minimizes costs. D. will receive less profits than if it produces at Q4.
Which of the following statements is FALSE about the issues faced by the government when contemplating a tax?
A) Consideration must be given to how tax rates relate to the amount actually received. B) Consideration must be given to how taxes influence market prices. C) Consideration must be given to how taxes influence equilibrium quantity. D) Consideration must be given to the amount of funds the government will be receiving from the transfer payments paid by the public to the government.
Darren loves to go to the movies, and he just learned that he can buy a ticket at a discounted price using his student ID. Darren now attends movies even more often. Which of the following factors of demand caused the change in Darren's behavior?
A. Number of buyers B. Preferences C. Price D. Income