Rumors of a Bank Failing, Even If Not True, Can

question 90

Multiple Choice

Rumors of a bank failing, even if not true, can become a self-fulfilling prophecy because:

• A)Customers will not want to obtain loans from this bank
• B)The rumors will cause people to not want to deposit in this bank
• C)Regulators will scrutinize the bank heavily looking for something wrong
• D)Depositors will rush to the bank to withdraw their deposits and the bank under normal situations would not have sufficient liquid assets on hand

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Definitions:

Private Company

A business entity owned by private individuals or entities and is not traded publicly on the stock market.

Natural Monopoly

A market condition where due to high infrastructure costs or significant barriers to entry, a single company can supply a product or service more efficiently than any potential competitor.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting the true financial gain of a business.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, not based on differences in costs.