When All Prices Are Set Equal to Marginal Costs

question 22

Multiple Choice

When all prices are set equal to marginal costs,

• A)consumers buy more than they should.
• B)consumers will get less utility.
• C)markets are giving correct signals to consumers.
• D)producers make excessive profits.

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Definitions:

Equity

Ownership interest in a company, represented by shares, which gives shareholders a claim on part of the company's assets and earnings.

Equity Financed

The method of raising capital through the sale of shares in a company.

Retained Earnings

The portion of a company’s profit that is held back and not distributed to shareholders as dividends, to be reinvested in the business.

EBIT

Earnings Before Interest and Taxes - an indicator of a company's profitability that calculates income without tax expenses and interest expenses.