How Can High Exit Costs Increase the Chance That Firms

question 8

Essay

How can high exit costs increase the chance that firms may continue to operate for at least a while when operating at a loss? Explain by giving examples.

---

Definitions:

T-bill

Short-term U.S. government debt obligation backed by the Treasury Department with a maturity of less than one year.

Standard Deviation

A statistic that measures the dispersion of a dataset relative to its mean, often used in finance to measure the volatility of returns.

Expected Rate

The anticipated return or yield on an investment, often based on historical data, current market conditions, and forecasts.

T-bill

Short-term government securities that mature in a year or less, offering investors a safe and liquid means of investment.