A Monopolist's TC Function and MC Functions Are as Follows

question 33

Multiple Choice

A monopolist's TC function and MC functions are as follows: TC = 20 + 4Q and MC = 4. This monopolist can be said to have which of the following characteristics?

• A) It must be producing at the socially optimal level of output.
• B) It is a natural monopoly.
• C) The marginal cost curve rises at an increasing rate.
• D) It is one of two firms in the industry.

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Definitions:

Clientele Effect

A theory suggesting that the stock price movements are influenced by the preferences of a company's current shareholder base.

Payout Ratios

The proportion of earnings paid out to shareholders in dividends, indicating how much profit is distributed versus retained.

Investors

Persons or organizations that invest funds anticipating financial profits in return.

Expectations Theory

With respect to dividends: a dividend that’s lower than expected will be taken as a negative by investors even if it is larger than previous dividends. A variation on the signaling effect of dividends. With respect to interest rates: A theory explaining the shape of the yield curve. The curve slopes up or down depending on whether expectations about future interest and inflation rates are increasing or decreasing.