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s2008m [1.1K]
4 years ago
5

Identify the following situation currently faced by the World Bank as adverse selection or moral hazard.

Business
1 answer:
nevsk [136]4 years ago
6 0

<u>Solution and Explanation:</u>

<u>Moral Hazard </u>– It is a situation when a  firm or an individual modify their behaviour once the person gets what one was desired to achieve; example, insurance, funding, etc.

<u>Adverse selection </u>- The firm does not information on the consumer, and, sells the product at lower price assessing a lower risk when more information would have made the seller ask for a higher price

a) Moral Hazard

The country changes its project plan after the World Bank extends the loan; if the World Bank has put in conditions that it be used only for a canal, then the loan cannot be used

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Because of his business's recent success, Sam has decided to expand his Sam's Swimming Pool Cleaning to include another branch.
ivann1987 [24]

Answer: initially Sam gross profit would drop. But overtime when he starts gaining customers in his new branch added to the already existing customers in his old branch there would a very large gross profit increase.

Explanation: Gross profit is the percentage of revenue a company retains after accounting for cost of goods/services.

In this case payment of staffs in both the old and new branches would be accounted for, with the new branch still very much dependent on the old branch for payment of staff until it can get its own customers, only then would the new branch be able to be self reliant and also make profit.

6 0
4 years ago
Read 2 more answers
Ecolap Inc. (ECL) recently paid a $1.26 dividend. The dividend is expected to grow at a 20.16 percent rate. At a current stock p
user100 [1]

Answer:

Expected return will be 22.65 %

Explanation:

We have given recently paid dividend = $1.26

Growth rate g = 20.16 %

Current stock price P_0=60.12 $

Next year dividend D_1=D_0(1+g)=1.26\times (1+0.2016)=1.26\times 1.2016=1.514

We have to find the expected return K_e

We know that current stock price is equal to P_0=\frac{D_1}{K_e-g}

60.72=\frac{1.514}{K_e-0.2016}

60.72 K_e - 12.241 = 1.514

60.72 K_e = 13.755

K_e = 0.2265 = 22.65 %

So expected return will be 22.65 %

8 0
4 years ago
In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic pro
Luba_88 [7]

Answer:

$3 per unit

Explanation:

In short run a monopolist and competitive firm try to maximize their profit and minimize costs until the the marginal revenue equals to the marginal cost.

In this question the average variable cost is lower than the marginal cost the difference between both is the profit for the short run.

Economic profit = Cost saving

Economic profit = Marginal Cost - Average variable cost

Economic profit = $8 - $5

Economic profit = $3

5 0
4 years ago
What is quality management
levacccp [35]
Quality management is the act of overseeing all activities and tasks that must be accomplished to maintain a desired level of excellence. This includes the determination of a quality policy, creating and implementing quality planning and assurance, and quality control and quality improvement.
8 0
2 years ago
You bought 1,000 shares of Tund Corp. stock for $60.59 per share and sold it for $82.35 per share after a few years. How will yo
ahrayia [7]

Answer:

gain will treat as capital gain at long term tax rate

Explanation:

given data

bought shares = 1,000  

stock for = $60.59 per share

sold  = $82.35 per share

solution

as gain from sale of stocks is held for an investment purpose and it is treated as capital gain

when stock is here held for more than year

so gain is taxed as long term capital gain

and when gain is less than year  than gain taxed short term capital gain

but here we have given stock for more than year

so here gain will treat as capital gain at long term tax rate

4 0
3 years ago
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