Explain why being a residual claimant can increase the risk from owning stocks.
What will be an ideal response?
The stockholders, being residual claimants, get what is left after everyone else has been paid. While this can be substantial during good years, it also means that during bad years the stockholders may get nothing, and if the corporation does poorly for a number of years, the stockholders' investment can be lost.
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Which of the following pairs illustrates the two extreme examples of market structures?
a. perfect competition and oligopoly b. perfect competition and monopoly c. monopoly and monopolistic competition d. oligopoly and monopolistic competition
If the aggregate demand curve shifts to the left and the aggregate supply curve shifts to the right, the result will be a
A. decrease in the level of output. B. decrease in the price level. C. higher price level. D. higher unemployment rate.