Which of the Following Statements of the Expected Flow of Future

question 189

Multiple Choice

Which of the following statements of the expected flow of future benefits is false?

• A) Firms must rely on forecasts of expected future benefits to make sensible investment decisions.
• B) Households, business firms, and governments all evaluate the expected flow of benefits when making investment decisions.
• C) If future benefits are overestimated by the firm, the firm will under invest in capital.
• D) If future benefits are underestimated by the firm, the firm will under invest in capital.

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Definitions:

Joint Stock Company

A business entity in which shares of the company's stock can be bought and sold by shareholders, and the ownership of which is divided among those shareholders.

Partnership Agreement

A document that outlines the rights, responsibilities, and obligations of each partner in a partnership.

Transferable Shares

Stocks or shares in a company that can be sold or transferred from one party to another without restrictions.

Limited Liability Companies

An organizational model that merges the direct tax benefits seen in partnerships or sole proprietorship with the benefit of reduced personal liability found in a corporation.