Which of These Assumptions Is Often Realistic for a Firm

question 261

Multiple Choice

Which of these assumptions is often realistic for a firm in the short run?

• A)The firm can vary both the size of its factory and the number of workers it employs.
• B)The firm can vary the size of its factory but not the number of workers it employs.
• C)The firm can vary the number of workers it employs but not the size of its factory.
• D)The firm can vary neither the size of its factory nor the number of workers it employs.

Apply the dividend growth model to determine the value of a stock.

Recognize the characteristics and rights of preferred and common stock.

Understand the implications of voting rights and techniques on corporate governance.

Identify the different models used for stock valuation.

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Definitions:

Economic Profit

The differential tally between gross receipts and total obligations, including costs both acknowledged and undeclared.

Average Variable Cost

The total variable cost per unit of output, calculated by dividing total variable costs by the quantity of output.

MR = MC

Marginal Revenue equals Marginal Cost; a condition used to determine the profit-maximizing level of output for a firm.

Profit-maximizing Quantity

The level of output at which a business realizes the greatest profit, where marginal cost equals marginal revenue.