Exhibit 4-2 -Refer to Exhibit 4-2. If the Supply Curve Shifts to Curve

question 60

Multiple Choice

Exhibit 4-2
-Refer to Exhibit 4-2. If the supply curve shifts to the right, then which of the following is true?

• A)D₁ results in the most decrease in the equilibrium price.
• B)D₁ results in the most increase in the equilibrium price.
• C)D₂ results in the most decrease in the equilibrium price.
• D)D₂ results in the most increase in the equilibrium price.
• E)The change in the equilibrium price is the same for D₁ and D_2.

---

Definitions:

Equity

The value of an ownership interest in a company, represented by the shares held by its investors.

Pre-Tax Cost

The expense associated with a resource or service before any taxes are applied.

Levered Value

The value of a firm that includes the impact of borrowing on its overall valuation.

Cost of Equity

Cost of equity is the return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate them for the risk they undertake by investing their capital.