A Small Population of Canada Lynx Feeds on Arctic Hares

question 171

Multiple Choice

A small population of Canada lynx feeds on Arctic hares.Then snowshoe hares (the lynx's favorite prey) are introduced.The snowshoe hares reproduce rapidly, and their population explodes.Based on your knowledge of predatorprey interactions, what changes would you expect in the lynx population and in the population of Arctic hares, the lynx's previous prey?

• A) Lynx and Arctic hare populations would both increase.
• B) Lynx and Arctic hare populations would both decrease.
• C) Lynx populations would increase and Arctic hare populations would decrease.
• D) Lynx populations would decrease and Arctic hare populations would increase.
• E) Lynx populations would increase and Arctic hare populations would not change.

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Definitions:

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often estimated using the Capital Asset Pricing Model (CAPM).

Pre-Tax Cost of Debt

The rate of return that a company pays on its debt, before taking into account tax deductions.

Face Value

The nominal value printed on a bond or security which indicates its worth at maturity but does not necessarily reflect its market value.

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay its shareholders and debt holders, weighted according to the proportion of equity and debt in the company's capital structure.