Consider a Color-Blind Firm That Is Currently Maximizing Profits

question 17

Multiple Choice

Consider a color-blind firm that is currently maximizing profits. An affirmative action policy is put in place requiring that all firms in the industry abide by a certain quota. Which of the following will occur?

• A)There will be no effect because the firm is currently color-blind.
• B)If the quota is already met, the firm will make no changes in its hiring practices.
• C)If the firm currently meets the required quota, it will cut costs by adjusting labor to exactly meet the affirmative action requirements.
• D)If the firm currently meets the quota, it will begin to lose profits due to the affirmative action requirements.
• E)The firm will have to fire some workers.

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Definitions:

Treasury Shares

Shares of a company's own stock that it has repurchased and are held in the company's treasury.

Treasury Stock

Stocks that a company originally issued and then bought back, which decreases the number of shares available for trade in the market.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.

Issue Cost

Expenses associated with the issuance of new securities, including legal, accounting, and printing costs.