Some claim that ratings agencies have a conflict of interest since:
A) they rate the quality of their own bonds
B) since agencies charge firms for their services rather than investors, they have an incentive to give high ratings to gain business
C) government began to include bond ratings as part of regulations of mutual funds, banks, and financial firms
D) they issued many of the mortgages that were later securitized into bonds
B
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In the dominant firm model as evidenced by the production of iPods by Apple, the entrance of the competitive fringe firms has what effect on the dominant firm?
A) Its price is lower, but it produces more output. B) Its price is lower, and it produces less output. C) Its price is the same, but it produces less output. D) Its price is higher, but it produces more output.
The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people
a. consider sunk costs. b. equate prices to the average costs of production. c. prefer to purchase products from smaller rather than larger firms. d. think at the margin.