Which of the Following Is a Characteristic of a Natural

question 561

Multiple Choice

Which of the following is a characteristic of a natural monopoly?

• A)Fixed costs are typically a small portion of total costs.
• B)Average total cost declines over large regions of output.
• C)The product sold is a natural resource such as diamonds or water.
• D)All of the above are correct.

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Definitions:

Perpetual Preferred Stock

A type of preferred stock with no fixed maturity date, offering dividends indefinitely without obligation of redemption by the issuer.

Flotation Cost

The total costs that a company incurs when it issues new securities, including underwriting, legal, and registration fees.

Annual Dividend

The total amount of dividends a company pays to its shareholders in one year, usually presented on a per share basis.

WACC

Weighted Average Cost of Capital; a calculation of a company's cost of capital in which each category of capital is proportionately weighted.