Which of the Following Statements Is FALSE

question 45

Multiple Choice

Which of the following statements is FALSE?

• A)Preferred stock usually has a stated or par value but unlike bonds,this par value is not repaid at maturity because preferred stocks do not have a maturity date.
• B)The only time the par value of preferred stock would be paid to the shareholder is if the company ceases operations or retires the preferred stock.
• C)Skipped preferred dividends become a liability of the company.
• D)Preferred stock cannot be converted into common stock.

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Definitions:

Externalities

Effects of a production or consumption activity on other parties not directly involved in the transaction, which may be either positive or negative.

Neutral Taxes

Taxes that do not affect the allocation of resources between different goods or activities in the economy.

Excess Burdens

The economic inefficiencies or losses that result from imposing taxes or government policies.

Principle of Second Best

An economic theory that suggests when a condition for a perfect market cannot be met, the next-best solution may involve violating another condition to improve efficiency.