The Practice of Tying Is Illegal on the Grounds That

question 145

Multiple Choice

The practice of tying is illegal on the grounds that

• A)it allows firms to expand their market power.
• B)it allows firms to form collusive arrangements.
• C)it prevents firms from forming collusive agreements.
• D)the Sherman Act explicitly prohibited such agreements.

---

Definitions:

PVGO

Present Value of Growth Opportunities; a model that estimates the value of a firm's shares excluding its current earnings, focusing on future growth.

P/E Ratio

Price-to-earnings ratio, a valuation metric for determining the relative worth of a company's shares by dividing stock price by earnings per share.

Cost of Equity

The return that investors require for investing in a company's equity, reflecting the risk of the investment.

Earnings Per Share

A metric used to determine a portion of a company's profit allocated to each outstanding share of common stock, calculated as net income divided by the number of shares.