Venture capital firms attempt to overcome the principal-agent problem by
A) investing only in industries with high profit rates.
B) charging high interest rates on loans.
C) holding large equity stakes in the firms they invest in.
D) avoiding investing in common stock.
C
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Consider three imaginary countries. In Aziria, saving amounts to $3,000 and consumption amounts to $7,000; in Graniva, saving amounts to $2,000 and consumption amounts to $8,000; and in Tanistan, saving amounts to $4,500 and consumption amounts to $10,500 . The saving rate is
a. higher in Aziria than in Tanistan, and it is higher in Tanistan than in Graniva. b. higher in Graniva than in Tanistan, and it is higher in Tanistan than in Aziria. c. higher in Tanistan than in Graniva, and it is the same in Graniva and Aziria. d. higher in Aziria than in Graniva, and it is the same in Aziria and Tanistan.
If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then
A) firms are breaking even. B) new firms are attracted to the industry. C) existing firms will exit the industry. D) market supply will remain constant.