When Tobin's Q Is __________,The Market Is Signalling a Firm

question 2

Multiple Choice

When Tobin's q is __________,the market is signalling a firm should __________.

• A)greater than one;invest in more capital
• B)equal to zero;shut down
• C)infinity;sell its stock holdings
• D)less than one;raise dividend payments
• E)equal to one;try to take over a firm with a Tobin's q = 0.

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Definitions:

Entry Barriers

Entry barriers are obstacles that make it difficult for new competitors to enter an industry or market, which includes factors like high initial investment, strict regulations, and strong incumbency advantages.

Mutual Interdependence

A situation in oligopoly markets where the actions of one firm directly affect and are affected by the actions of other firms.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for significant influence over price.

Countervailing Power

The theory that competitive markets can be achieved through balancing the power of large companies by organizing a counterforce, such as labor unions or government regulations.