Which of the Following Would Correctly State an Argument for Antitrust

question 66

Multiple Choice

Which of the following would correctly state an argument for antitrust laws given by traditional antitrust theorists?

• A) The purpose of antitrust law is to encourage economic efficiency.
• B) An accumulation of economic power can lead to an accumulation of political power, which leads to political consequences for consumers.
• C) Concentrated economic power does not necessarily lead to political consequences and companies should not be punished for their success.
• D) To foster competition, a few powerful sellers should dominate the economy.
• E) Great economic power leads to greater efficiency that translates to lower costs to consumers.

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation used to estimate the average rate of return a company is expected to pay its security holders to finance its assets.

MM Model

Refers to the Modigliani-Miller theorem, which proposes that under certain market conditions and assumptions, the value of a firm is unaffected by its capital structure.

Bankruptcy Risk

The likelihood that a company will be unable to meet its financial obligations and may have to declare bankruptcy.

Debt Financing

Raising funds through borrowing, typically by issuing bonds or taking out loans, which must be repaid at a later date, usually with interest.