Which of the Following Determines Whether a Firm Will Earn

question 58

Multiple Choice

Which of the following determines whether a firm will earn higher revenues when it raises its price?

• A)The cost of the firm's inputs.
• B)Government regulation of the industry.
• C)The price elasticity of demand.
• D)None of the above, because companies always earn higher revenues when they increase price.

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Definitions:

Equity Method

The equity method is an accounting technique used by firms to assess the profits earned by their investments in other companies by reporting these profits in proportion to their ownership.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue. It indicates the company's financial performance over a specified period.

Owned Subsidiary

A company whose majority of shares is held by another company, making it controlled by the parent company.

Intra-entity Gross Profit

Profits arising from transactions within the same entity, requiring elimination during the consolidation process to avoid overstatement of revenues.