This topic contains a solution. Click here to go to the answer

Author Question: Comment on the following statement: When a firm retains earnings for investment purposes, it is ... (Read 136 times)

j.rubin

  • Hero Member
  • *****
  • Posts: 557
Comment on the following statement: When a firm retains earnings for investment purposes, it is actually saving on behalf of its shareholders.
 
  What will be an ideal response?

Question 2

Why does the absence of well-defined property rights serve as a stumbling block for the application of the Coase theorem?
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

ultraflyy23

  • Sr. Member
  • ****
  • Posts: 312
Answer to Question 1

The statement is true. If the firm did not retain its profits, it would distribute them to shareholders in the form of dividends. Households could then decide whether to save these funds or spend them. Thus, by making the decision to hold onto a portion of its profits, it is making the decision to save these profits on behalf of its shareholders.

Answer to Question 2

Well-defined property rights are necessary in order for the possibility of
Bargaining between parties. If property rights are not well-defined there really
would be no point in bargaining.





 

Did you know?

Although the Roman numeral for the number 4 has always been taught to have been "IV," according to historians, the ancient Romans probably used "IIII" most of the time. This is partially backed up by the fact that early grandfather clocks displayed IIII for the number 4 instead of IV. Early clockmakers apparently thought that the IIII balanced out the VIII (used for the number 8) on the clock face and that it just looked better.

Did you know?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Did you know?

The term bacteria was devised in the 19th century by German biologist Ferdinand Cohn. He based it on the Greek word "bakterion" meaning a small rod or staff. Cohn is considered to be the father of modern bacteriology.

Did you know?

Egg cells are about the size of a grain of sand. They are formed inside of a female's ovaries before she is even born.

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

For a complete list of videos, visit our video library