Assume There Is a Decrease in the Number of Substitutes

question 23

Multiple Choice

Assume there is a decrease in the number of substitutes for a good produced by a profit-maximizing price-setting firm.All else constant,this would cause the firm's ability to markup price above average cost to:

• A)decrease.
• B)stay the same.
• C)increase.
• D)cannot be determined with the information given.

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Definitions:

Dividends

Profit payouts by a corporation to its shareholders, usually as a method of distributing earnings.

Initial Value Method

An accounting approach for investments where the investment is recorded at its original cost without subsequent adjustments for changes in market value.

Equity Method

A method of accounting for investments where the investor's share of the investee's profits or losses is recognized in the investor's income statement.

Investment in Pitts Co.

The allocation of resources, typically financial, into Pitts Company with the expectation of generating a future financial return.