Both fiRms Are 100% Equity-fiNanced

question 36

Multiple Choice

Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $12,500. How many shares will be given to firm B's stockholders in the stock-financed deal?

• A) 3,000
• B) 3,300
• C) 3,667
• D) 4,250
• E) 5,762

Identify the role of advertising and external changes (e.g., technological, socio-economic) in affecting demand for goods.

Distinguish between movements along the demand or supply curve versus shifts in these curves.

Explain the economic reasoning for specific market actions, such as pricing strategies or responses to market changes.

Understand the definition and characteristics of inferior goods.

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Definitions:

Government Purchases

Spending by the government on goods and services that are directly consumed or invested in by the government sector.

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels in a short time frame, assuming that some production costs remain fixed.

Spending Multiplier

The ratio of a change in national income to a change in government spending that causes it, indicating the impact of fiscal policy on the economy.

Long Run

A period of time in economics where all factors of production and costs are variable, and all market adjustments have been made.