You Read a Story in the Newspaper Announcing the Proposed

question 43

Multiple Choice

You read a story in the newspaper announcing the proposed merger of Dell Computer and Gateway. The merger is expected to greatly increase Gateway's profitability. If you decide to invest in Gateway stock,you can expect to earn

• A)above average returns since you will share in the higher profits.
• B)above average returns since your stock price will definitely appreciate as higher profits are earned.
• C)below average returns since computer makers have low profit rates.
• D)a normal return since stock prices adjust to reflect expected changes in profitability almost immediately.

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Definitions:

Identical

Exactly the same, without any difference.

Long-run Equilibrium

A state in which all factors of production can be adjusted, allowing for the optimal allocation of resources in a market or economy over time.

Identical Cost Curves

These are cost curves for different firms that have the same shape and attributes, indicating that the firms have the same cost structure at various levels of output.

Industry Produce

The total output of goods and services produced by all the firms operating in a particular industry.