If Production Is Not at an Efficient Level, Which of the Following

question 35

Multiple Choice

If production is not at an efficient level, which of the following must be true?

• A)Marginal social benefit exceeds marginal social cost.
• B)Marginal social cost exceeds marginal social benefit.
• C)Production will increase.
• D)Production will decrease.
• E)none of the above

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Definitions:

Equity Financing

A method of raising capital for a company through the sale of shares in the company, thus giving shareholders ownership interests.

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues and profits without increasing financial leverage or external equity.

Retention Ratio

The share of net income not disbursed as dividends to shareholders but rather reserved by the business for various uses.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in the form of dividends, compared to the portion reinvested in the business.