Which One of the Following Statements Is Correct

question 20

Multiple Choice

Which one of the following statements is correct?

• A)Firms with large net operating losses tend to be acquiring firms rather than target firms.
• B)The leverage associated with an acquisition increases the tax liability of the acquiring firm.
• C)If either an increase or a decrease in the level of production causes the average cost per unit to increase then the firm is currently operating at its optimal production level.
• D)Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E)If a firm uses it surplus cash to acquire another firm then the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

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Definitions:

Tariffs

Tariffs are taxes imposed by a government on imported or exported goods.

Quotas

Government-imposed trade restrictions that limit the quantity or monetary value of goods that can be imported or exported during a specified time.

Comparative Advantage

The ability of a country to produce a particular good or service at a lower opportunity cost than its trading partners.

Import Quota

A government-imposed limit on the quantity or value of goods that can be imported into a country.