In the "Reaction Function" Diagram of Question #18 Above, If

question 9

Multiple Choice

In the "reaction function" diagram of Question #18 above, if the firms are at point A and if both firms are seeking to maximize profit, the foreign firm wants to __________ its sales in this market, and the home firm __________its sales in this market.

• A) decrease; also wants to decrease
• B) decrease; wants to increase
• C) increase; wants to decrease
• D) increase; also wants to increase

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Definitions:

CAPM Equation

The formula used in the Capital Asset Pricing Model that describes the relationship between the risk of an investment and its expected return.

Company

A legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise.

Expected Return

The anticipated gain or loss that an investor predicts from an investment over a period, based on historical averages or estimated models.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds.