What Level Will the World Price of a Commodity Settle

question 121

Multiple Choice

What level will the world price of a commodity settle at?

• A)where there is no excess demand in the exporting country
• B)where supply and demand are equal within each country
• C)where the excess demand in the exporting country is equal to the excess demand in the importing country
• D)where the excess demand of the importing country is just equal to the excess supply of the exporting country

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Definitions:

M&M II

The second proposition by Modigliani and Miller which states that in the absence of taxes, bankruptcy costs, and asymmetric information, and in an efficient market, the value of a levered firm is equal to the value of an unlevered firm plus the present value of the tax shields due to debt.

Pre-Tax Cost

Pre-Tax Cost refers to the expense or cost a company incurs before any taxes are deducted.

Debt-Equity Ratio

A financial ratio indicating the relative proportion of shareholder's equity and debt used to finance a company's assets.

Weighted Average

A mathematical calculation that takes into account the varying degrees of importance of the numbers in a data set, providing a measure that reflects the relative importance of each value.