Which of the Following Statements Is Most Correct

question 6

Multiple Choice

Which of the following statements is most correct?

• A) If the capital intensity ratio is high, this permits sales to grow more rapidly without much outside capital.
• B) The lower the profit margin, the lower the additional funds needed because less assets are needed to support existing sales.
• C) When positive economies of scale are present, linear balance sheet relationships no longer hold. As sales increase, a proportionately greater stock of assets is required to support the higher sales level.
• D) Technological considerations often require firms to add fixed assets in large, discrete units. Such assets are called lumpy assets and they affect the firm's financial requirements through the fixed assets/sales ratio at different sales levels.
• E) The percentage of sales method accounts for changing balance sheet ratios and thus, cyclical changes in the actual sales/assets ratio do not have an impact on financing requirements.

Distinguish between the long-run and short-run economic outcomes for firms in monopolistic competition.

Grasp the significance and consequences of advertising within monopolistically competitive markets.

Understand why the monopolistically competitive market structure does not achieve allocative or productive efficiency.

Recognize how product variety in monopolistic competition influences consumer choice and market efficiency.

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Definitions:

Lorenzo Ghiberti

An Italian Renaissance sculptor, famous for his work on the bronze doors of the Florence Baptistery, known as the "Gates of Paradise."

Abbot Suger

A French abbot of the 12th century known for his role in developing Gothic architecture, especially through his work on the Basilica of St. Denis.

Giorgio Vasari

An Italian painter, architect, and writer known for his biographies of Renaissance artists in "The Lives of the Most Excellent Painters, Sculptors, and Architects."

Louis IX

Louis IX, known as Saint Louis, was King of France from 1226 until his death in 1270 and is the only French king canonized in the Catholic Church.