How does moral hazard contribute to high bank leverage?
What will be an ideal response?
First, bank managers are typically compensated at least partly on the basis of their ability to provide shareholders with a high ROE. Second, federal deposit insurance has increased moral hazard by reducing the incentive depositors have to monitor the behavior of bank managers.
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Nadia operates a frame shop and charges the perfectly competitive price of $65 for custom framing of a standard size picture. She is a price-taking producer. To maximize her profit, Nadia will:
a. accept framing orders up until the point where the marginal cost of doing so is $65. b. seek to produce at the point where her average variable cost is $65. c. seek to operate at the minimum point on her average variable cost curve. d. seek to operate at the minimum point on her marginal cost curve.
Refer to Table 8-13. Real GDP for Vicuna for 2013 using 2015 as the base year equals
A) $4,620. B) $5,100. C) $5,650. D) $5,850.