Which of the Following Statements Is Correct Concerning the Cost

question 14

Multiple Choice

Which of the following statements is correct concerning the cost of two firms merging? The cost:

• A) is fixed when the merger is financed with cash.
• B) can be affected by postmerger gains if cash is used.
• C) decreases as the postmerger share price increases when stock is used to finance the merger.
• D) is not determined until after the merger, regardless of the type of financing.

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Definitions:

Marginal Social Benefit

The additional benefit to society from consuming one more unit of a good.

Marginal Cost

The financial outlay required to produce an additional product unit.

Socially Optimal

The socially optimal point is where the societal benefits of consuming a good or service equal the societal costs of producing it, leading to an efficient allocation of resources.

Marginal Benefit

The increase in utility or enjoyment an individual gets by consuming an additional unit of a good or service.