In a Well-Functioning Competitive Market, Total Surplus

question 119

Multiple Choice

In a well-functioning competitive market, total surplus:

• A) can never be negative.
• B) is always zero if the market is efficient.
• C) can be negative if the market is not in equilibrium.
• D) is greater than the sum of consumer and producer surplus.

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Definitions:

Dividend Payment

A disbursement of a portion of a company's earnings decided by the board of directors to its shareholders.

Residual Dividend Policy

A strategy where dividends are paid to shareholders from the leftover or residual earnings after all operational and expansion costs are covered.

Target Capital Structure

The ideal mix of debt, preferred stock, and common equity that a company aims to hold to minimize its cost of capital.

Forecasted Net Income

An estimated calculation of a company's earnings after all expenses and taxes have been subtracted from revenue for a given future period.