The Primary Difference Between the "Payoff" and the "Purchase and Assumption

question 88

Multiple Choice

The primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks is

• A)that the FDIC guarantees all deposits when it uses the "payoff" method.
• B)that the FDIC guarantees all deposits when it uses the "purchase and assumption" method.
• C)that the FDIC is more likely to use the "payoff" method when the bank is large and it fears that depositor losses may spur business bankruptcies and other bank failures.
• D)that the FDIC is more likely to use the purchase and assumption method for small institutions because it will be easier to find a purchaser for them compared to large institutions.

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Definitions:

Marginal Revenue Product Schedule

A table or graph that shows the additional revenue generated by employing one more unit of a resource, holding all other factors constant.

Resource Demand Schedule

A table or graph showing the quantity of a resource that firms are willing and able to hire at different wages or prices.

Firm

An organization that produces and sells goods or services in order to make a profit.

Derived Demand

Derived demand refers to the demand for a good or service that arises from the demand for another good or service it produces or contributes to.