Other Things Constant, the More Profitable a Corporation Is

question 63

Multiple Choice

Other things constant, the more profitable a corporation is,

• A)the lower the value of its shares on the stock market and the lower the interest rate that would have to be paid on new bond issues
• B)the higher the value of its shares on the stock market and the higher the interest rate it would have to pay on new bond issues
• C)the higher the value of its shares on the stock market and the lower the interest rate that would have to be paid on new bond issues
• D)the lower the value of its shares on the stock market and the higher the interest rate that would have to be paid on new bond issues
• E)the lower the interest rate that would have to be paid on new bond issues; the value of its shares on the stock market does not vary

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Definitions:

OPEC Oil Cartel

An international organization of oil-producing countries that coordinates and unifies the petroleum policies of its member states to stabilize oil markets and prices.

Inelastic

Describing demand that does not significantly change with the price changes of a good or service.

Income Elasticities

Refers to the sensitivity of the demand for a good to changes in the income of the consumers who buy this good.

Normal Goods

Products that see an increase in demand when consumer income grows, and experience a drop in demand as consumer income declines.