Differentiate between the coordination problem and the incentive problem
What will be an ideal response?
The coordination problem refers to the problem of bringing economic agents together to trade, whereas the incentive problem refers to the problem of aligning the interests of economic agents. These problems can occur in a command economy.
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The OLS residuals
A) can be calculated using the errors from the regression function. B) can be calculated by subtracting the fitted values from the actual values. C) are unknown since we do not know the population regression function. D) should not be used in practice since they indicate that your regression does not run through all your observations.
Stocks and bonds are similar in the sense that
a. both are sold initially in primary markets and then traded in secondary markets b. both are means of providing firms with the means of financing capital expenditures c. their prices are both perceived as signals of a firm's performance by management d. their values can both be calculated by discounting future payments to obtain a present value e. all of the above