IPOs Are Generally Overpriced in Order to Raise Large Amounts

question 101

True/False

IPOs are generally overpriced in order to raise large amounts of cash.

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Definitions:

Producer Surplus

The gap between the price sellers are ready to accept for a good and the actual price obtained.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved, leading to an underproduction or overproduction of that good or service.

Deadweight Loss

A loss of economic efficiency that occurs when the equilibrium outcome is not achieved or when the market does not allocate resources at the optimal point.

Tax Revenue

The profit derived by governments from tax collection.