Resource Use Is Allocatively Efficient

question 395

Multiple Choice

Resource use is allocatively efficient

• A) when marginal benefit equals marginal cost.
• B) when the maximum possible quantity is being produced.
• C) whenever marginal benefit exceeds marginal cost.
• D) whenever marginal cost exceeds marginal benefit.

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Definitions:

Leverage

The use of borrowed funds to increase the potential return of an investment.

Optimal Capital Structure

The best mix of debt, preferred stock, and common equity that maximizes a company’s stock price while minimizing its cost of capital.

Stock Price

The current market price of a company's shares, as bought and sold by investors on stock exchanges.

Cost of Capital

The mandatory rate of gain a business must realize on its investment schemes to maintain its market identity and attract funds.