Which of the Following Is a Plausible Solution to a Distortion

question 5

Multiple Choice

Which of the following is a plausible solution to a distortion?

• A)By centralizing the privately owned enterprises
• B)By shutting down any industry which is contributing to atmospheric pollution
• C)By imposing a tax or subsidy on the activity if the social marginal cost or the social marginal benefit exceeds the market price
• D)By imposing an importation ban on manufactured goods

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Definitions:

Residual Dividend Approach

A policy for setting a company's dividend payment, where the dividend paid is based on earnings minus funds the firm retains to finance the equity portion of its capital budget.

Debt-to-Equity Ratio

A ratio reflecting the comparative amounts of debt and equity used to finance a company’s assets.

Investment Needs

The amount of capital required to fund a project, purchase assets, or support operations within a business.

Regular Cash Dividend

A payment made by a firm to its shareholders from its profits in the form of cash.