When Countries Create a Free Trade Area and Increase Market

question 39

Multiple Choice

When countries create a free trade area and increase market size, the schedule relating

• A)price to the number of firms in the market shifts to the left.
• B)average total cost to the number of firms in the market shifts to the left.
• C)average total cost to the number of firms in the market shifts to the right.
• D)price to the number of firms in the market shifts to the right.
• E)average total cost to the number of firms in the market remains constant.

Recognize the effect of flotation costs on the cost of new equity and retained earnings.

Comprehend the application of the cost of capital in capital budgeting decisions.

Understand the concept of risk-adjusted discount rates for evaluating projects with different risk levels.

Explain the role of the Capital Asset Pricing Model (CAPM) in estimating the cost of equity.

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Definitions:

Electronic Communications Privacy Act

A United States federal law enacted in 1986 to extend government restrictions on wire taps from telephone calls to include transmissions of electronic data by computer.

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A United States federal law that addresses voluntary and compelled disclosure of "stored wire and electronic communications and transactional records" by service providers.

Password-Protected

Describes a file, piece of information, or device that cannot be accessed without entering the correct password.

Digital Sampling

The technique of recording a segment of sound, often from previously existing recordings, and reusing it in a new musical composition or recording.