The Development of Market Power by a Firm Is Considered

question 126

Multiple Choice

The development of market power by a firm is considered to be a market failure because firms with market power will

• A)Produce more and charge a lower price than what would be socially optimal.
• B)Tend to ignore external costs.
• C)Produce less and charge a higher price than what would be socially optimal.
• D)Not respond to consumer demand.

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Definitions:

Partnership

A Partnership is a legal form of business operation between two or more individuals who share management and profits.

Capital Accounts

Accounts on a company's balance sheet that represent the cumulative amount of equity invested by shareholders and retained earnings.

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue.

Noncumulative

Pertaining to dividends, a feature allowing a company not to pay dividends in arrears to its shareholders.