Refer to the Graph

question 348

Multiple Choice

Refer to the graph. Other things equal, a decrease in the price of a substitute resource would cause a

• A)move from a to b on D₁.
• B)shift from D₂ to D₃, assuming the output effect exceeds the substitution effect.
• C)shift from D₃ to D₂, assuming the output effect exceeds the substitution effect.
• D)move from b to a on D₁.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.

Common Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a company's common stock at a set price before the option expires.

Corporate Capital Structure

The mix of debt, equity, and other securities that a company uses to finance its activities.