If asset A is a risky asset yielding 10 percent and asset B is a riskless asset with the same maturity with a yield of 8 percent, investors would
A) prefer asset A.
B) prefer asset B.
C) be indifferent between the two assets.
D) None of the above.
D
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Accounting profits are
A) total revenue minus explicit costs. B) total revenue minus implicit costs. C) total revenue minus explicit and implicit costs. D) total revenue minus normal costs.
What is moral hazard?
A) It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. B) It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off. C) It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. D) It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.