Caverun Co

question 13

Multiple Choice

Caverun Co. has two classes of stock. The company may:

• A) issue stock warrants, which are short-term options to buy shares.
• B) issue stock rights, which are long-term options to buy shares.
• C) not use stock options to make one class of stock more attractive than the other.
• D) use stock options and warrants, the form and content of which are determined by the board of directors, to supplement compensation plans for directors, officers, and employees.
• E) Both issue stock warrants, which are short-term options to buy shares  and also  issue stock rights, which are long-term options to buy shares.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to market stability.

Equilibrium Quantity

The amount of products or services that are offered and sought after at the balanced market price.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity has the power to significantly influence market prices.

Horizontal Summation

A method used in economics to determine the total market demand for a product by adding together the individual demands at each price level.