Asymmetric Information in Financial Markets Is a Potential Problem Usually

question 16

Multiple Choice

Asymmetric information in financial markets is a potential problem usually resulting from:

• A) borrowers having more information than the lenders.
• B) lenders having more information than borrowers.
• C) the fact that people are basically dishonest.
• D) the uncertainty about Federal Reserve monetary policy.

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Definitions:

Unit Variable Expenses

Costs that vary directly with the level of production or sales volume, calculated on a per unit basis.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent and salaries.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead in the cost of a product.

Net Operating Income

The total operating profit of a company after all operating expenses, excluding taxes and interest expenses, have been deducted from total revenue.