Which of the Following Statements Are True

question 28

Multiple Choice

Which of the following statements are true?
I. Pre-tax cost of debt is generally higher than the pre-tax cost of equity
II. Interest is tax deductible
III. Preferred dividends are tax deductible
IV. Total cost of capital is normally less than or equal to cost of equity

• A) II and IV
• B) II, III and IV
• C) I, II and IV
• D) II only

Interpret the role of concentration ratios in evaluating industry market structure.

Comprehend the market dynamics and outcome under a colluding oligopoly.

Evaluate the impact of government intervention on collusion and price fixing.

Analyze the conditions under which cartels are likely to be successful or fail.

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Definitions:

Pound

A unit of currency used in the United Kingdom and other areas, or a unit of weight equal to 16 ounces.

Convex Preferences

Consumer preferences that signify a desire for diversified bundles of goods, represented by convex-shaped indifference curves.

Indifferent

A term used in economics and decision theory to describe a situation where an individual or consumer does not prefer one option over another.

Diminishing Marginal

The principle that the marginal benefit of using or consuming one more unit of a good or service decreases as its quantity increases.