What Does the Separation Theorem Demonstrate

question 16

Multiple Choice

What does the separation theorem demonstrate?

• A)Firms that separate share price and cost minimize costs and thus produce more goods, which benefits society.
• B)Firms should separate their management decisions between those that benefit society and those that benefit shareholders.
• C)All investors are better off when firms separate their investment decisions from the preferences of their owner/investors.
• D)Investors that own shares directly should be separated from investors that own shares indirectly.

---

Definitions:

Satisfaction

The fulfillment of one's wishes, expectations, or needs, or the pleasure derived from this.

Budget Line

An illustrative depiction of every possible pairing of two items that could be bought within a set budget at unchanging prices.

Slope

A measure of the steepness or incline of a line, often calculated as the ratio of the vertical change to the horizontal change between two points on the line.

Good A

A generic term often used in economics to describe a type of product or commodity.