Explain why some small start-up companies choose not to pay dividends even though they make very large profits. Why might investors still be happy with this arrangement?
What will be an ideal response?
Small start-up companies may choose to take the profit and use it to reinvest in the company rather than pay it out as dividends. This can be a cheaper way of borrowing financial capital versus borrowing from banks. Investors are likely to be happy with this arrangement is they believe that the company can make a higher rate of return on the profit than the investors could on their own in an alternative use.
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Assuming full employment, if the private sector saves 8 percent of its income and the government raises taxes by $500 to finance public investments, total investment will increase by $460
Indicate whether the statement is true or false
All of the points inside a production possibilities frontier are ____; all of the points on the production possibilities frontier are ____.
A. efficient; inefficient B. inefficient; efficient C. attainable; unattainable D. rational; zero-cost E. unattainable; efficient