A Firm Should Exit the Industry If Which of the Following

question 85

Multiple Choice

A firm should exit the industry if which of the following conditions apply?

• A) TR > TC
• B) P < AC
• C) Lifetime expected profit is positive.
• D) Prices are low now but expected to rise.

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Definitions:

Bankruptcy and Insolvency Act

Legislation that provides the legal framework for the resolution of financial distress and insolvency situations, including the reorganization or liquidation of debtor assets.

Capital Structure

The mix of different forms of capital, such as debt, equity, and hybrid securities, used by a company to fund its operations and growth.

M&M Proposition I

A theory stating that the value of a leveraged firm is the same as the value of an unleveraged firm provided there are no taxes, bankruptcy costs, and asymmetric information.