According to the Survey of Senior Managers by Graham, Harvey

question 35

Multiple Choice

According to the survey of senior managers by Graham, Harvey and Rajgopal, the senior managers admitted to the following:
I. adjusting their firms' operations and investments in order to manage earnings.
II. they were willing to decrease discretionary spending in R&D, advertising or maintenance if necessary to meet earnings target.
III. many of them would, if necessary, also defer or reject investment projects with positive
NPVs.

• A) I only
• B) II only
• C) I and II only
• D) I, II, and III

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods.

Marginal Product

The increase in output that results from employing one more unit of a factor of production.

Income Effect

How an individual's or economic income shift influences the demand for goods or services.

Substitution Effect

The substitution effect describes the change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.