Answer:
The correct answer is option B.
Explanation:
A corrective tax is a policy used by the government to decrease negative externality. It is different from negative externality in the sense that it brings allocation of resources closer to the socially optimal level.
The imposition of tax on a product increases the cost of production of a commodity. This increase in the cost of production will cause the production of the product to decrease. As a result, a fewer quantity of the product causing externality will be produced.
So negative externality will be reduced and the economy will move closer towards economic efficiency.
Answer:
True
Explanation:
It is true that this fact violates the efficient markets hypothesis because the efficient markets hypothesis argues that it is impossible to earn above-market returns.
Efficient market hypothesis holds that asset prices reflect all available information. A direct implication is that <u>it is impossible to "beat the market" </u>consistently on a risk-adjusted basis since market prices should only react to new information.
Hence since it is impossible to beat the market, it is impossible to earn above-market returns.
Answer:
b. $2.50 per share undervalued
Explanation:
If the Company A major competitor has Share Price / EPS of 15X. Then, it means that the share price of company A should be = EPS * Competitor Share Price / EPS = $1.50 * 15 = $22.50
But, the share price of company A is $20.
So, we concluded Company A shares are Undervalued by $2,50 ($22.50 - $20).