All other factors held constant, when McDonald's raises the price of its Quarter Pounder by 50 cents,
A) there is likely to be a decrease in the quantity of Taco Bell's Chalupas demanded, assuming the Quarter Pounder and Chalupas are substitutes.
B) there is likely to be an increase in demand for Taco Bell's Chalupas, assuming the Quarter Pounder and Chalupas are substitutes.
C) there is likely to be a decrease in demand for Taco Bell's Chalupas, assuming the Quarter Pounder and Chalupas are substitutes.
D) there is likely to be an increase in demand for McDonald's Quarter Pounder, assuming the Quarter Pounder and Chalupas are substitutes.
B
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The principal-agent problem
A) occurs when managers have more incentive to maximize profits than the stockholders-owners do. B) in financial markets helps to explain why equity is a relatively important source of finance for American business. C) would not arise if the owners of the firm had complete information about the activities of the managers. D) explains why direct finance is more important than indirect finance as a source of business finance.
A lender who is worried that its cost of funds might rise during the term of a loan it has made can hedge against this rise by
A) buying futures contracts on Treasury bills. B) selling futures contracts on Treasury bills. C) buying call options on Treasury bills. D) increasing the amount of money which it lends.