Punam Was the Director of a Broadly Held Corporation That

question 147

Multiple Choice

Punam was the director of a broadly held corporation that made educational software. Without the knowledge or consent of the board of directors, Punam started a competing business that she ran from home. Which of the following is true?

• A) Punam has breached a fiduciary duty owed to the corporation.
• B) Punam is only a director, so she owes no special duty to the corporation.
• C) Punam can compete with the business, as long as she doesn't use confidential documents belonging to the corporation.
• D) Punam owes the shareholders of the corporation a fiduciary duty, so they could sue her if they suffer a loss.
• E) Whether or not Punam can compete with the business depends on whether her written contract prohibits it.

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Definitions:

Marginal Revenue

The extra income a business earns by selling an additional unit of a product or service.

Marginal Cost

The elevated cost associated with manufacturing an additional unit of a product or service.

Competitive Firm

A company that operates in a market where it competes against other firms for market share and customers.

Long-run Equilibrium

A state in which supply equals demand, and all firms in the market are operating at an efficient scale with no incentive to enter or exit.