What Would You Expect to Happen to the Price of a Share

question 64

Multiple Choice

What would you expect to happen to the price of a share of stock on the day it goes ex-dividend if you ignore taxes? The price should:

• A) increase by the amount of the dividend.
• B) decrease by the amount of the dividend.
• C) decrease by one-half the amount of the dividend.
• D) remain constant.

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Definitions:

Output Level

The quantity of goods or services produced by a business or economy within a certain period.

Short-Run Equilibrium

The condition in which, in the short term, the quantity of goods supplied equals the quantity of goods demanded at the current price.

Marginal Revenue

The income increment from disposing of an extra unit of a good or service.

Marginal Cost

The expenses involved in creating an additional unit of a product or service.