If Input Prices Are Higher Than Firms Expect

question 1

Multiple Choice

If input prices are higher than firms expect,

• A)output prices will have to go lower to get the firms to produce.
• B)demand will likely increase.
• C)the aggregate supply curve will shift to the left.
• D)the supply curve will shift the right.

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Definitions:

After-Tax Cost of Debt

The net cost of debt after accounting for the effects of taxes, reflecting the actual cost to a company.

Cost of Equity

The theoretical compensation paid by a company to its equity investors, or shareholders, for the risk involved in investing their capital.

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay to all its security holders to finance its assets.

WACC

Weighted Average Cost of Capital; a formula used to calculate a business's cost of capital, where every type of capital is weighted according to its proportion.