It Is Difficult to Talk Conclusively About the Allocation of Resources

question 16

Multiple Choice

It is difficult to talk conclusively about the allocation of resources in an oligopoly because:

• A) entry is impossible in oligopolies.
• B) both price and output can be higher in oligopolies than in perfect competition.
• C) the level of competition varies greatly in oligopolistic markets.
• D) non-price competition is rare in an oligopoly.

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Definitions:

Cost of Equity

The rate of return that a company is expected to pay to its shareholders to compensate them for the risk of investing in the equity of the company.

Leverage

The use of various financial instruments or borrowed capital, like debt, to increase the potential return of an investment.

Debt-Equity Ratio

The ratio of a firm's total liabilities to its shareholders' equity, used to assess financial leverage.

Financial Risk

The possibility of losing money on an investment or business venture, often associated with the uncertainty of returns.