What Is the Economies of Scope Character for a Firm

question 169

Multiple Choice

What is the economies of scope character for a firm that has a straight-line product transformation curve?

• A) Economies of scope (SC > 0)
• B) Diseconomies of scope (SC < 0)
• C) SC = 0
• D) SC = 1

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Definitions:

Constant Growth DDM

A dividend discount model that assumes dividends will continue to increase at a constant growth rate indefinitely, used to evaluate the price of a stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends and without voting rights.

Plowing Back

The reinvestment of earnings by a company back into its own operation or projects, also known as retained earnings.

ROE

Return on Equity, a financial ratio that measures the profitability of a business in relation to shareholder’s equity, indicating how well a company uses investments to generate earnings growth.