Acme Widget Tells Investors It Wants to Build a New

question 49

Multiple Choice

Acme Widget tells investors it wants to build a new widget factory and sell investors $10,000,000 in bonds to finance it. Once they have raised the $10,000,000 the owners of Acme Widget use the funds to finance a trip to Atlantic City to try out a new scheme they have devised to win at blackjack. This is an example of

• A)the adverse selection problem in financial markets.
• B)the moral hazard problem in financial markets.
• C)the difficulty lenders have in distinguishing good from lemon firms.
• D)the problems with using rational expectations in financial markets.

---

Definitions:

Educational Expense Assistance

Programs or benefits provided by an employer to help cover education-related costs for their employees, often to encourage continuous learning and development.

Skill Obsolescence

The phenomena where skills become outdated or irrelevant due to technological advancement or changes in the industry.

New Technology

The introduction and application of innovative or advanced tools, equipment, or methodologies in a particular field or operation.

Fundamental Values

Core beliefs or principles that are considered inherently important and serve as the foundation for behavior, decision-making, and the evaluation of actions.