When Demand Is Unit Elastic

question 5

Multiple Choice

When demand is unit elastic

• A)price and revenue move in opposite directions.
• B)price and revenue are not related.
• C)price and quantity demanded move in opposite directions.
• D)price and revenue move in the same direction.

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Definitions:

M&M Proposition I

Modigliani and Miller's principle suggesting the irrelevance of financial leverage on a company's valuation in an ideal market.

Debt-Equity Ratio

A calculation of a firm's financial leverage determined by dividing its overall liabilities by the equity of its shareholders.

Interest Tax Shield

The reduction in income taxes that results from the deductibility of interest payments from taxable income.

Capital Structure

The combination of debt and equity financing that a company uses to fund its operations and growth.