Author Question: Why does the structure of a corporate business complicate the analysis of a ... (Read 43 times)

urbanoutfitters · **on:** Jun 30, 2018

Why does the structure of a corporate business complicate the analysis of a strategy?

Question 2

If monopolistically competitive firms are earning economic profits, then in the transition to the long-run equilibrium:
a. more firms will enter the industry.
b. prices will tend to fall.
c. each firm will produce a smaller quantity of output.
d. all of the above will occur.

recede · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A corporation's executives and board of directors might make choices that are in their personal interests rather than those of their shareholders, who would prefer decisions that maximize the values of their stock. Managers whose firms produce substantial free cash flows may prefer to spend them on questionable acquisitions that often fail to benefit shareholders. Such acquisitions, however, give managers a larger firm to run, which generally means higher pay and more prestige in the community.

Answer to Question 2

d