If the Price of New Automobiles Rises in the U

question 77

Multiple Choice

If the price of new automobiles rises in the U.S.market while prices remain unchanged in foreign markets,

• A) foreign firms will want to export fewer automobiles to the United States
• B) foreign firms will want to export more automobiles to the United States
• C) foreign firms will not change their exports to the United States since it is a different market
• D) U.S.firms will want to export more automobiles to foreign markets
• E) U.S.firms will not change their exports to foreign markets unless foreign prices also change

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Definitions:

M&M Proposition I

A theory stating, under certain conditions, that the value of a firm is unaffected by how it is financed, whether through debt or equity.

Interest Tax Shield

The reduction in income taxes that results from taking a deductible charge, such as interest on debt, reducing taxable income.

Tax

Compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Capital Structure

The mix of different forms of external funds and equity used by a firm to finance its overall operations and growth.