Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the
A)supply of existing shares of the stock and the price will both rise.
B)supply of existing shares of the stock and the price will both fall.
C)demand for existing shares of the stock and the price will both rise.
D)demand for existing shares of the stock and the price will both fall.

Question

Quizplus · Accepted Answer

When a government finds a major defect in a company's product and demands its removal from the market, it typically leads to a loss of consumer confidence and potential financial losses for the company. This negative news can cause investors to sell their shares, increasing the supply of the stock in the market. However, the demand for these shares is likely to decrease as investors become wary of the company's future profitability and regulatory compliance. This decrease in demand, coupled with an increase in supply, generally leads to a fall in the stock price.

Suppose the Government Finds a Major Defect in One of a Company's