Which of the Following Can a Firm Do in the Long

question 264

Multiple Choice

Which of the following can a firm do in the long run but not in the short run?

• A)Decrease the size of its physical plant
• B)Reduce its rate of output by laying off workers
• C)Increase its variable costs
• D)Increase its use of raw materials

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be mitigated through diversification.

Beta Value

A measure of a stock's volatility in relation to the overall market, indicating the level of risk associated with the stock.

Unsystematic Risk

The risk associated with a specific company or industry, also known as non-systemic risk, which can be mitigated through diversification.

Risk Premium

The extra return expected by investors for taking on a higher level of risk compared to a risk-free investment.