How does adverse selection affect the willingness of corporations to issue stock?
What will be an ideal response?
Since adverse selection reduces the price of the stock of a good corporation below its true value, corporations will be less likely to issue shares of stock.
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A firm is employing capital and labor such that the marginal product of capital is 30 and the marginal product of labor is 10
If the price of a unit of capital is $50 and the price of a unit of labor is $10, is the firm minimizing its costs? If not, can you recommend a change for the firm to make in its relative amounts of labor and capital used? Explain.
Suppose that a machine costs $10,000 in constant dollars and the real rate of interest is 12 percent
If the machine is expected to increase in price by 2 percent and the rate of depreciation is 5 percent, then the user cost of capital for that machine over one year is equal to ________. A) $150 B) $1,500 C) $10,000 D) $102,500