A Characteristic of a Competitive Free Market Is That, If

question 64

Multiple Choice

A characteristic of a competitive free market is that, if external costs exist, they:

• A) enable the market to allocate resources efficiently.
• B) are reflected by the total market supply curve.
• C) are not reflected by the total market supply curve.
• D) are reflected by the total market demand curve.

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Definitions:

Retained Earnings

Retained earnings represent the cumulative amount of net income that a company has reinvested in its business rather than distributed to shareholders as dividends.

Common Equity

The amount of capital that belongs to the common shareholders of a company, represented by common stock and retained earnings.

Stock Price

The cost of purchasing a single share of a particular company, which fluctuates based on demand and supply dynamics in the market.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital (debt, equity) is proportionately weighted.