A Lesson of the Enron Collapse Is That Government Regulation

question 89

Multiple Choice

A lesson of the Enron collapse is that government regulation

• A)always fails.
• B)can reduce but not eliminate asymmetric information problems.
• C)increases the problem of asymmetric information.
• D)should be reduced.

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Definitions:

Administrative Expenses

Expenses related to the general operation of a company, including salaries of executives, costs of administrative facilities, and office supplies, not directly tied to production.

Net Operating Income

A profitability metric that measures the amount of income generated from a company's operational activities before taxation and interest expenses.

Contribution Approach

An income statement formatting that separates fixed from variable costs, showing contribution margin.

Opportunity Cost

The loss of potential gain from other alternatives when one option is chosen.