Which of the Following Is True

question 161

Multiple Choice

Which of the following is true?

• A) MSB = MB + Marginal external benefit
• B) MB = Marginal external benefit - MSB
• C) MB = Marginal external benefit + MSC
• D) MSB = Marginal external cost - marginal external benefit
• E) MSB = MB + Marginal external benefit - Marginal external cost

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Definitions:

Noncumulative

Describes preference shares where the right to dividend payments does not accumulate if the dividend is not paid in any year.

Nonparticipating

Describes an insurance policy where the policyholder does not receive dividends or refunds from the insurer's surplus.

Preferred Stock

A type of stock that provides dividends before any dividends are provided to common stockholders and typically has rights to assets over common stock in the event of a company liquidation.

Participating Preferred Stock

A type of preferred stock that provides dividends and an additional right to participate in the excess profits of the company after the common stock dividends have been paid.