A Board of Directors Is Considering Whether to Invest a Great

question 21

Multiple Choice

A board of directors is considering whether to invest a great deal of money into research and development.Such a decision could have a long-term beneficial effect for the company's future.As an alternative,the board could forego the expenditure into research and development and buy back its own shares in order to immediately increase the company's reserves.Which of the below groups would most likely favor the option to increase the company's reserves and not invest in more research and development?

• A) Management.
• B) Shareholders.
• C) Stakeholders other than the shareholders.
• D) Each of the above groups would probably feel the same way.

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Definitions:

Producer Surplus

The difference between the amount a producer is willing to accept for a good and the actual price they receive.

Tacos

A traditional Mexican dish consisting of a folded or rolled tortilla filled with various mixtures, such as beef, cheese, vegetables, and spices.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, measured above the supply curve.

Market Price

The existing price point at which an asset or service is traded in a designated market area.