How does adverse selection affect the participation of small- and medium-sized firms in the stock market?
What will be an ideal response?
Many small- and medium-sized firms will be unwilling to issue shares of stock for a price below its true value. Many will be unable to find investors who will be willing to purchase their stock due to fears about adverse selection.
You might also like to view...
Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple
A) equals his marginal utility from his 14th loaf of bread. B) is twice his marginal utility from his 14th loaf of bread. C) is half his marginal utility from his 14th loaf of bread. D) is such that his total utility from apples equals his total utility from bread.
What is one reason drunk driving is held in such disrepute?
A) Drunk driving imposes high potential costs on non-drunk drivers. B) Drunk driving destroys cars and telephone poles, causing disruption in essential services. C) Only drunk drivers cause automobile fatalities. D) Drunk drivers impose high potential costs on other drunk drivers.