When Managers of Firms in a Competitive Market Observe Falling

question 22

Multiple Choice

When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing

• A)a violation of conventional market forces.
• B)over-investment.
• C)the entry of new firms.
• D)too few firms in the market.

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Definitions:

Cardozo Standard

A legal principle named after Justice Benjamin Cardozo, emphasizing the importance of foreseeability and reasonable expectations in determining duty of care.

Privity

In contract law, the relationship that exists between two parties to a contract giving each a recognized interest in the subject matter of the contract so that they are bound to that contract.

Sarbanes-Oxley

A U.S. federal law enacted in 2002 to protect investors by improving the accuracy and reliability of corporate disclosures.

Public Company Accounting Oversight Board

A regulatory agency that is charged with the task of making certain that correct, unbiased, and comprehensive data finds their way to potential investors, so that they can make informed decisions about investment opportunities.