What trends can generally be observed in shareholder value as the market share of the firm output increases?
A) It rises in proportion with the market share.
B) It falls, reaches a minimum and then rises.
C) It rises, reaches a maximum and then falls.
D) If falls in inverse proportion with the market share.

Question

Quizplus · Accepted Answer

Generally, as the market share of the firm output increases, the shareholder value also increases due to economies of scale, increased market power, and higher revenues. However, at a certain point, the firm may encounter diminishing returns and face challenges such as increased competition and regulatory scrutiny, leading to a decline in shareholder value. Thus, shareholder value tends to follow a U-shaped curve, rising to a maximum and then falling.

What Trends Can Generally Be Observed in Shareholder Value as the Market