In Order for Corporate Diversification to Be Economically Valuable

question 38

Multiple Choice

In order for corporate diversification to be economically valuable

• A) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
• B) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
• C) there must be some valuable economy of scope among the multiple businesses in which a firm is operating and it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.
• D) there must not be any valuable economy of scope among the multiple businesses in which a firm is operating and it must be more costly for managers in a firm to realize these economies of scope than for outside equity holders on their own.

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Definitions:

Quantity Demanded

refers to the specific amount of a good or service that consumers are willing and able to buy at a given price over a certain period of time.

Price p

Represents a reference to a specific, but unspecified, price level in economic models, often used in theoretical contexts.

Inverse Demand Function

A mathematical representation that expresses the price of a good as a function of the quantity demanded, highlighting how price can be influenced by changes in demand.

Demand Function

An equation that illustrates the quantity of an item that will be purchased at various prices, often factoring in influences like consumer income and tastes.