Stan Is an Investment Manager

question 76

Multiple Choice

Stan is an investment manager.He has received money from various investors and given them a promise of very high returns on their investments.The invested money is not supplying enough capital to pay the returns promised,so he has started using new investors' money to pay older investors.By advertising and by word of mouth,people are anxious to invest with Stan because of the money being paid,and with the influx of new investors,he is able to continue operating.Stan is

• A) operating an insider-trading operation.
• B) racketeering.
• C) guilty of conspiracy to defraud.
• D) operating a Ponzi scheme.

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Definitions:

Profit-Maximizing Firms

Businesses that aim to achieve the highest possible profit from their operations.

Market Failure

The inability of a market to bring about the allocation of resources that best satisfies the wants of society; in particular, the overallocation or underallocation of resources to the production.

Property Rights

Legal rights to possess, use, and dispose of assets such as land, buildings, goods, or intellectual property.

Long-Term Stream

A strategy or planning horizon that focuses on achieving goals or outcomes over an extended period, rather than immediate results.