Scenario 9.2 Consider a Publicly Held Firm (One Whose Stock Shares Are

question 112

Multiple Choice

Scenario 9.2
Consider a publicly held firm (one whose stock shares are traded on the stock exchange) that earned revenue worth $350 million and incurred land, labor, and debt costs worth $320 million. The stockholders who have invested a total of $100 million in this firm could have earned 10 percent return on other comparable investments.
-One assumption of the model of perfect competition is that entry into the market is easy. This implies that:

• A)there are government licensing requirements for a firm to enter the market.
• B)there are no significant economies of scale relative to the size of the market.
• C)one firm has gained a patent in the industry.
• D)significant economies of scale do exist in the industry.
• E)there is no government intervention.

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Definitions:

Current Operations

Activities related to the primary business objectives that generate revenue within the current fiscal period.

Controlling Influence

The power to govern the financial and operating policies of an entity to benefit from its activities.

Parent

In the context of business, a parent company is one that owns enough voting stock in another corporation to control its board of directors and therefore its operations and policies.

Subsidiary

A company controlled by another company, known as the parent company, through the ownership of more than half of its voting stock.