Consider debt-equity swaps as an approach to debt reduction. Briefly describe how this works. State two arguments in favor of significant reliance on this strategy and two arguments against
What will be an ideal response?
In favor: may help restore a healthy balance between debt and equity, which in turn provides greater flexibility in repayment of debt, and may help facilitate a privatization program. Against: leads to issue of high-powered currency (so may be inflationary) and in some indebted countries there is limited availability of companies in which foreign investors have an interest in purchasing. If the question is asked after Chapter 15 has been covered, pros and cons of MNCs in development may figure into the answers.
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When a rent ceiling is imposed in a housing market, the opportunity cost of housing equals the
A) rent. B) market equilibrium rent that would prevail in the absence of a rent ceiling. C) value of the time and resources spent searching plus the rent. D) consumer surplus.
Total variable cost is the sum of all
A) costs of the firm's fixed factors of production. B) costs associated with the production of goods. C) costs that rise as output increases. D) implicit costs.