According to James Tobin, the long-run value of Tobin's Q should move toward
A) 0.
B) 1.
C) 2.
D) infinity.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

According to James Tobin, the long-run value of Tobin's Q should move toward 1. Tobin's Q is a ratio comparing the market value of a company to the replacement value of its assets. A Q value of 1 suggests that the market value and replacement value are equal, indicating an equilibrium state that the market would naturally gravitate towards over the long run.

According to James Tobin, the Long-Run Value of Tobin's Q