If Tobin's Q Is Greater Than 1, Then Managers Should

question 86

Multiple Choice

If Tobin's q is greater than 1, then managers should:

• A) increase the capital stock of the firm.
• B) maintain the existing capital stock of the firm.
• C) allow inventories to run down.
• D) decrease the capital stock of the firm.

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Definitions:

Tax

An obligatory fiscal contribution or another form of assessment enacted by a governmental body on individuals or entities, aimed at generating revenue for government activities and public spending.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition.

Supply Function

An economic formula that shows the relationship between the quantity of a good supplied and its price, often influenced by production costs and market competition.

Supply Function

A mathematical relationship that describes the quantity of a good or service that producers are willing to sell at various prices.