A Principles of Microeconomics Professor Wants to Know How Much

question 179

Multiple Choice

A Principles of Microeconomics professor wants to know how much prior knowledge her students have before beginning the class so she gives them a pre-test. This action is an example of

• A)signaling.
• B)screening.
• C)adverse selection.
• D)moral hazard.

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Definitions:

Total Liabilities

The sum of all financial obligations a company owes to outside parties, including debts and other financial commitments.

Shareholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities; also known as stockholders' equity.

Equity Multiplier

A financial leverage ratio that measures the portion of a firm's assets that is financed by stockholder's equity.

Profit Margin

A financial ratio that shows the percentage of revenue that remains as profit after all expenses have been paid, including costs, taxes, and interest.