Which of the Following Statements Is CORRECT

question 81

Multiple Choice

Which of the following statements is CORRECT?

• A) Trade credit is provided only to relatively large, strong firms.
• B) Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies.
• C) Short-term debt is favored by firms because, while it is generally more expensive than long-term debt, it exposes the borrowing firm to less risk than long-term debt.
• D) Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
• E) Commercial paper is typically offered at a long-term maturity of at least five years.

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Definitions:

Nonexcludable

A characteristic of a good or service whereby individuals cannot be effectively excluded from using it, often resulting in public goods.

Public Good

A product or service that is made available to all members of society, characterized by non-excludability and non-rivalry in consumption.

Free-Rider Problem

A situation where some individuals consume more than their fair share of a public resource, or do not pay for their share, leading to underproduction or depletion of the resource.

Drop-In-The-Bucket Problem

A problem intrinsic to public goods: The good or service is usually so costly that its provision generally does not depend on whether any single person pays.