Specific Assets Can Create Problems for a Company

question 39

Multiple Choice

Specific assets can create problems for a company.If a supplier invests in new machinery to deliver a part useful only to its biggest and best customer,it can find itself with:

• A)a low cost delivery output.
• B)a holdup problem.
• C)significant externalities.
• D)an outsourcing dilemma.

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Definitions:

Secondary Market

A marketplace where previously issued financial instruments such as stocks, bonds, options, and futures are bought and sold.

Corporate Bond

A type of debt security issued by corporations to finance their operations, expansions, or other expenditures, offering periodic interest payments and the return of the principal at maturity.

Convertible Bond

A type of bond that can be converted into a predetermined number of the issuer's equity shares at certain times during its life, usually at the discretion of the bondholder.

Dow Jones Industrial Average

An index that represents the stock performance of 30 large, publicly-owned companies based in the United States.