Exam 9: Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The company that manufactures Screaming Chocolate Zonkers breakfast cereal finds that its sales collapse, it is forced into bankruptcy, and it defaults on its bonds, as a result of information on the filthy conditions in its factory, which had long been known to management, leaking out to the general public. This incident is best thought of as an example of

According to a 2012 study of the crowd funding site Kickstarter, what percent of firms failed to meet the deadlines for finishing a product?

Requirements for information disclosure for firms that desire to sell securities in financial markets

Compared to CDs and money market funds, crowd funding

Venture capital firms attempt to overcome the principal-agent problem by

Which of the following is an example of adverse selection?

The existence of adverse selection results in:

Since crowd funding sites do not themselves invest in business start ups that raise funds on their sites, they don't reduce:

Suppose some members of Enron's board of directors are aware of the company's true financial condition, information that is not available to most investors. This is an example of

If there were no adverse selection problems in the stock market,

Why are corporations more likely to raise funds externally by debt instead of equity?

Transaction and information costs

Financial intermediaries are able to exploit economies of scale since

Individual investors can reduce transactions costs by

Why is adverse selection more likely in financial markets when interest rates rise?

Financial intermediaries are able to act as delegated monitors for individual savers because

Moral hazard is not eliminated in debt financing because

In regard to crowd funding, it was expected that the SEC would limit the amount that small investors can invest in any one company to no more than:

Private information-collection firms fail to eliminate the adverse selection problem because

The reduction in transactions costs brought about by financial intermediaries benefits