When a Third Firm Enters a Market That Was Previously

question 88

Multiple Choice

When a third firm enters a market that was previously categorized as a duopoly,the equilibrium price will ________ and the equilibrium quantity will ________.

• A) be lower; be lower
• B) be higher; be lower
• C) be lower; be higher
• D) be higher; be higher
• E) not change; not change

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Definitions:

Return On Equity

A financial ratio that measures the profitability of a business in the relation to the equity, indicating how effectively shareholder equity is being utilized.

Price-Earnings Ratio

A financial ratio that measures a company's current share price relative to its per-share earnings.

Debt-To-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity, indicating the proportion of equity and debt used to finance a company's assets.

Dividend Payout Ratio

A financial ratio that measures the proportion of earnings paid out as dividends to shareholders.