In the Short Run

question 34

Multiple Choice

In the short run:

• A) all inputs are variable.
• B) firms can use any input combination they want.
• C) firms can choose among all possible production techniques.
• D) some inputs are fixed.

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Definitions:

Dividend Reinvestment Plans

Investment plans that allow shareholders to automatically reinvest their cash dividends in additional shares of the company's stock, usually without commission.

Strict Residual Dividend Policy

A dividend policy in which dividends are based on the earnings left over after all operating expenses, taxes, and project investments are covered.

Dividend Payout Ratio

The percentage of earnings paid to shareholders in dividends, calculated as dividends per share divided by earnings per share.

Clientele Effect

The attraction of companies with specific dividend policies to those investors whose needs are best served by those policies. Thus, companies with high dividends will have a clientele of investors with low marginal tax rates and strong desires for current income. Similarly, companies with low dividends will attract a clientele with little need for current income and who often have high marginal tax rates.