Suppose Some Members of Enron's Board of Directors Are Aware

question 60

Multiple Choice

Suppose some members of Enron's board of directors are aware of the company's true financial condition, information that is not available to most investors. This is an example of

• A)lemon problem.
• B)moral hazard.
• C)adverse selection.
• D)asymmetric information.

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Definitions:

Net Proceeds

The amount of money received from a sale after subtracting costs and expenses.

Commission

A fee paid to an agent or employee for transacting a sale or performing a service, often a percentage of the sale amount.

Consignment

The act of giving goods to another party to sell on your behalf, but retaining ownership until the goods are sold.

Gross Cost

Gross Cost refers to the total expense incurred before any deductions, such as discounts or rebates, providing a raw figure of the financial outlay for a purchase or project.