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People often convey the idea behind MM’s proposition 1 by various supermarket,analogies, for example, “The value of a pie should not depend on how it is sliced,” or,,“The cost of a whole chicken should equal the cost of assembling one by buying two,drumsticks, two wings, two breasts, and so on.”,Actually proposition 1 doesn’t work in the supermarket. You’ll pay less for an uncut,whole pie than for a pie assembled from pieces purchased separately. Supermarkets,charge more for chickens after they are cut up. Why? What costs or imperfections cause,proposition 1 to fail in the supermarket? Are these costs or imperfections likely to be important,for corporations issuing securities on the U.S. or world capital markets? Explain.

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