If Pop Company Owns 15% of the Common Stock of Son

question 80

Multiple Choice

If Pop Company owns 15% of the common stock of Son Company, then Pop Company typically:

• A)Would record 15% of the net income of Son Company as investment income each year.
• B)Would record dividends received from Son Company as investment revenue.
• C)Would increase its investment account by 15% of Son Company income each year.
• D)All of the above are correct.

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Definitions:

Perfect Competitor

A market participant that cannot influence the market price and must take it as given because the market is perfectly competitive.

Short Run

A period in economic theory during which at least one input, such as plant size or the number of firms in the industry, is fixed and cannot be changed.

Perfect Competitor

A theoretical market structure in which many firms sell an identical product, and no single buyer or seller can influence the market price.

Perfectly Competitive Industry

A market structure where many firms sell identical products, entry and exit are easy, and no single buyer or seller can affect the market price.