Which of the Following Firms Are in a Monopolistically Competitive

question 282

Multiple Choice

Which of the following firms are in a monopolistically competitive market?

• A) the many retail firms such as JCPenney, Macys, The Gap, and so on
• B) the sole local providers of electricity, such as Kansas Power and Light, or Pacific Gas and Electric
• C) the many farmers that grow wheat
• D) the cell phone service firms such as Verizon, Sprint, AT&T

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Definitions:

Dividend Cuts

A reduction in the dividend payments announced by a company, often due to financial difficulties or a need to retain more earnings for investments.

Target D/E Ratio

The desired debt-to-equity ratio that a company aims to achieve to optimize its capital structure.

Residual Dividend Policy

Residual Dividend Policy is a strategy where a company pays dividends out of the residual or leftover equity only after all project capital needs are met.

Dividend Irrelevance Theory

Holds that dividend policy has no effect on either the price of a firm’s stock or its cost of capital.