Free Entry of Firms Is a Characteristic Of

question 86

Multiple Choice

Free entry of firms is a characteristic of:

• A)all industries in the U.S.economy.
• B)perfectly competitive industries.
• C)centralized economies.
• D)industries in which firms are earning positive economic profit.

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Definitions:

Modigliani And Miller Model

A financial theory proposing that the market value of a company is determined by its earning power and the risk of its underlying assets, and is independent of its capital structure.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity used to finance its overall operations and growth.

Stock Price

The cost of purchasing a share of a company's stock. The price at which a stock is traded on the market, representing the value investors assign to a company.

MM Model

The Modigliani-Miller theorem, proposing that in a perfect market, the value of a firm is unaffected by how it is financed, whether through debt or equity.