Empirical Studies Suggest That When a Large Number of Firms

question 108

Multiple Choice

Empirical studies suggest that when a large number of firms are present in a market, prices are usually ________ and profits are usually ________ than when there are only a few firms in a market.

• A) lower; higher
• B) lower; lower
• C) higher; higher
• D) higher; lower

---

Definitions:

Discount Rate

The interest rate used to discount future cash flows to present value to account for risk and time value of money.

Working Capital

The gap between a firm's current assets and its current liabilities, showcasing its short-term financial stability.

Annual Cash Inflow

The total amount of money received by a company over a year, including revenues from sales, investments, and other sources.

Net Present Value

An economic indicator that finds the disparity between cash inflows' present value and the present value of cash outflows during a certain period.