If firms are earning a profit, then this raises the ______ value of installed capital and implies a ______ value of Tobin's q.

Question

Quizplus · Accepted Answer

When firms are earning a profit, it indicates that the installed capital is being utilized efficiently and effectively, which increases the market value of the capital. This, in turn, implies a high value of Tobin's q, which reflects the stock market's assessment of the value of the firm's assets. Therefore, the correct choice is B.

If Firms Are Earning a Profit, Then This Raises the ______