Monopolists Are Said to Be Allocatively Inefficient Because

question 17

Multiple Choice

Monopolists are said to be allocatively inefficient because:

• A) they produce where MR > MC.
• B) at the profit-maximizing output,price is greater than AVC.
• C) they produce only the type of product they desire and do not consider the consumer.
• D) at the profit-maximizing output,the marginal benefit to society from increasing output is greater than the marginal cost to society.

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Definitions:

Retention Ratio

The proportion of net income that is retained by a company rather than distributed to shareholders as dividends.

Sustainable Growth Rate

The maximum growth rate a firm can achieve without having to finance growth with additional equity or debt.

Quebec Firm

Refers to a business organization that is registered or operates in Quebec, Canada, subject to provincial laws and regulations.

Equity Value

The value of a company’s shares; it represents the residual value to shareholders after debts and liabilities have been settled.