The ________ Protects the Decisions of a Board of Directors

question 20

Multiple Choice

The ________ protects the decisions of a board of directors that acts on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the corporation and its shareholders.

• A) Williams Act
• B) antifraud provision of the Securities and Exchange Commission
• C) pro rata rule
• D) business judgment rule

---

Definitions:

Marginal Decision Rule

A principle that suggests decisions should be made by considering the additional benefits and costs of one more unit of change.

MC > MR

A condition where the marginal cost of producing an additional unit is greater than the marginal revenue gained from selling it, which suggests a decrease in production to maximize profits.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for differentiation and some degree of market power.

Long Run

A period in which all factors of production and costs are variable, allowing companies to adjust to changes in the market.