Rula Hired Mike to Act as Her Stockbroker

question 3

Multiple Choice

Rula hired Mike to act as her stockbroker.In that capacity,Mike was authorized to buy and sell stocks on behalf of Rula as her agent.Rula paid very little attention to the details of the transactions that Mike entered into on her behalf.She adopted a very different attitude,however,after she received an anonymous tip that Mike was intentionally inflating the commissions that he received for buying and selling stocks for Rula by making an unreasonably large number of trades for her account.Which of the following statements is TRUE?

• A)Mike may be held liable for breach of fiduciary duty even if Mike made money for Rula in the end.
• B)Mike may be held liable for breach of fiduciary duty only if Rula can prove,as a result of that breach,either that she suffered a loss or that Mike received a benefit.
• C)Mike may be held liable only if he breached an express instruction from Rula.
• D)Mike is liable for breach of his duty of care to Rula.
• E)Mike is only liable for breach of a fiduciary duty if Rula can prove that she took reasonable steps to monitor Mike's behaviour.

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Definitions:

Equilibrium

A state of balance in a market system where supply equals demand, and there is no tendency for change.

Economic Profits

The difference between total revenues and total costs, including both explicit and implicit costs, reflecting the excess return over the firm's opportunity costs.

Demand Curve

A graph showing how the quantity demanded of a good or service varies with its price.

Elastic

A characteristic of a good or service where its demand or supply changes significantly when its price changes.