Which of the Following Statements Is Most Correct

question 53

Multiple Choice

Which of the following statements is most correct?

• A) "New-stock" dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the total equity of a firm.
• B) Investors receiving stock dividends must pay taxes on the new shares at the time the stock dividends are received.
• C) Stockholders pay no income tax on dividends reinvested in a dividend reinvestment plan.
• D) Both statements a and b are correct.
• E) None of the statements above is correct.

---

Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity has a significant influence on the market price.

Long-Run Equilibria

A state in economics where all factors of production and costs are variable, and firms make decisions to maximize profits without any fixed inputs.

Demand Increases

A situation in which the desire and ability of consumers to purchase a good or service grow, typically leading to higher prices and potentially greater supply.

Market Supply

The total amount of a specific good or service that is available to consumers at current prices in a given market.