A Key Finding of the Economic Analysis of Financial Structure

question 51

Multiple Choice

A key finding of the economic analysis of financial structure is that

• A) the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses.
• B) while free-rider problems limit the extent to which securities markets finance some business activities, the majority of funds going to businesses are channeled through securities markets.
• C) given the great extent to which securities markets are regulated, free-rider problems are not of significant economic consequence in these markets.
• D) economists do not have a very good explanation for why securities markets are so heavily regulated.

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Definitions:

Toxic Chemicals

Substances that can cause harm to organisms and the environment when released or exposed in significant quantities.

Graphic Warnings

Visual health warnings found on product packaging, aimed at informing consumers of the risks associated with use, often used for cigarettes.

Biologically Magnified

Refers to the process by which the concentration of toxic substances increases in each successive link in the food chain.

Trophic Level

The position an organism occupies in a food chain, determined by its feeding relationships.