From a Financial Management Perspective, Which of the Following Is

question 5

Multiple Choice

From a financial management perspective, which of the following is true regarding the introduction of the Euro?

• A)U.S.-based MNCs are not subject to exchange rate risk when they have transactions in euros.
• B)The euro is pegged to all other European currencies.
• C)Transactions costs decline for MNCs that conduct transactions within Europe.
• D)The euro replaced the British pound.

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Definitions:

Market Equilibrium

A condition where the quantity of a good or service supplied equals the quantity demanded, leading to no upward or downward pressure on price.

Inefficient

A situation where resources are not used in the most effective way, leading to potential waste or lost opportunities.

Externalities

Costs or benefits of a market activity borne by a third party; externalities can be either positive or negative.

Pigovian Taxes

Taxes imposed on activities that generate negative externalities, aiming to correct market inefficiencies and reduce unwanted behaviors.