Acompetitive market system a. encourages growth by allowing producers to make profitable investment decisions based on market signals. b. encourages growth by ensuring that everyone in society will receive a decent standard of living. c. discourages growth because firms busy competing have no time to innovate or invest. d. discourages growth unless government protects domestic firms from foreign competition.

Which of the following statements is correct? stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. takeovers are most likely to be attempted if the target firm’s stock price is above its intrinsic value. one advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership.