A Perfectly Elastic Supply Curve

question 54

Multiple Choice

A perfectly elastic supply curve

• A)has no relevance, since real-world supply curves are never perfectly elastic
• B)is a horizontal straight line
• C)is a vertical straight line
• D)is an upward-sloping straight line
• E)is not a straight line

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Definitions:

Market Risk Premium

The additional financial return an investor aims to achieve by having a risky market portfolio instead of investments that are risk-free.

WACC

Weighted Average Cost of Capital, a calculation of a firm's capital cost that weighs each category of capital (equity, debt) proportionately.

CGT

Capital Gains Tax, a tax on the profit realized on the sale of a non-inventory asset that was purchased at a cost amount that was lower than the amount realized on the sale.

Selling New Common Stock

The process whereby a company issues and sells additional shares of its common stock to investors to raise capital.