Which One of the Following Correctly Identifies a Characteristic of a Monopolistic

question 10

Multiple Choice

Which one of the following correctly identifies a characteristic of a monopolistic market?

• A) A monopolist maximizes profit at the point where price = marginal cost.
• B) A monopolist will always earn supernormal profits.
• C) A monopoly firm faces a perfectly elastic demand curve.
• D) There is no excess capacity in a monopoly.

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Definitions:

Earnings Reinvestment

The practice of reinvesting a company's earnings back into its business to fund growth activities rather than distributing them as dividends to shareholders.

Growth Rate

The percentage increase in a company's revenue or profit over a specific period.

Cost of Equity Capital

The return a company requires to decide if an investment meets capital return requirements and is typically used in the capital asset pricing model.

Price/Earnings Ratio

A valuation metric for a company that measures its current share price relative to its per-share earnings.