Hostile takeovers of corporations have been in the business news for some time now. Several states have passed laws making it harder for out-of-state corporations to acquire firms headquartered in their states. Several corporations have established
"golden parachutes" to give executives high payoffs in case of hostile takeover. What market imperfection is likely to be worsened by these actions? Explain.
The problem of agency is likely to grow worse. Managers are less likely to increase earnings and share prices in order to make acquisition more difficult. "Golden parachutes" protect managers from failure and make acquisition more difficult.
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Suppose that the Consumer Price Index for a particular economy rose from 110 to 120 in year 1, 120 to 130 in year 2, and 130 to 140 in year 3. We could conclude that this economy is experiencing:
A. accelerating inflation. B. deflation. C. disinflation. D. a constant rate of inflation.
Which is the most accurate statement?
A. The poverty of older Americans is much greater than the problem of child poverty. B. Public assistance has been considered a great success. C. Medicare and Medicaid date back to the New Deal of the 1930s. D. Less than half of those eligible receive food stamps.