When Speculators Are Right, They

question 25

Multiple Choice

When speculators are right, they:

• A) move consumption of goods from times when they have a high value to times when they have a low value.
• B) move consumption of goods from times when they have a low value to times when they have a high value.
• C) often decrease economic efficiency since they raise prices in the short term.
• D) decrease the opportunity cost of current production.

Grasp the concept of adverse selection as a pre-contractual problem.

Identify the types of problems in principal-agent relationships.

Recognize the importance of information gathering in solving agency problems.

Understand the role of incentive compensation in managing agent behavior.

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Definitions:

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Variable Cost

Expenses that fluctuate directly and proportionately with changes in production volume or activity level, such as raw materials and direct labor.

Planning Budget

A financial plan that forecasts revenue, expenditures, and resources needed for a particular period.

Static Budget

A financial plan that does not change or adjust over the period for which it is set, regardless of variations in activity levels or performance.