A Key Finding of the Economic Analysis of Financial Structure

question 34

Multiple Choice

A key finding of the economic analysis of financial structure is that

• A)the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses.
• B)while free-rider problems limit the extent to which securities markets finance some business activities,nevertheless the majority of funds going to businesses are channeled through securities markets.
• C)given the great extent to which securities markets are regulated,free-rider problems are not of significant economic consequence in these markets.
• D)economists do not have a very good explanation for why securities markets are so heavily regulated.

Analyze profit maximization strategies through various pricing models.

Understand the process of finding zeros of polynomial functions and their application in economics.

Apply supply and demand principles to determine market equilibrium.

Calculate financial implications in markup and pricing strategies.

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Definitions:

Common Stock Dividend

Payments made to shareholders from a company's earnings, reflecting a share of the profit allocated to each share of common stock.

Bonds Payable

Represents the amount owed to bondholders by the issuer, typically a long-term liability on the company’s balance sheet.

Long-term Debt

Borrowings or financial obligations that are due to be repaid more than one year from the balance sheet date.

Pension Outflow

A financial term referring to payments made to retired employees or beneficiaries from a pension fund.