The Explicit and Implicit Costs Associated with Corporate Default Are

question 68

Multiple Choice

The explicit and implicit costs associated with corporate default are referred to as the _____ costs of a firm.

• A) flotation
• B) default beta
• C) direct bankruptcy
• D) indirect bankruptcy
• E) financial distress

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Definitions:

Absolute Advantage

Refers to the ability of a country, individual, or firm to produce more of a good or service with the same amount of resources than competitors.

Economies of Scale

Refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Domestic Price

The price of goods or services within a country's borders, influenced by local supply and demand conditions.

World Price

the international market price of a good or service, influenced by worldwide demand and supply conditions.