Consider the Following Statements

question 216

Multiple Choice

Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?

• A) a only
• B) b only
• C) c only
• D) a and b
• E) a, b, and c

---

Definitions:

Securitization

The financial practice of pooling various types of contractual debt such as mortgages and selling their related cash flows to third-party investors as securities.

Newly Created Securities

Financial instruments such as stocks or bonds that have been recently issued and are available for investment.

Original Issuer

The entity or organization that initially offers or issues a financial instrument or security to the public.

Special Relationship

A legal concept denoting a duty of care that exists between parties, beyond general public duty.