Comparing a Perfectly Competitive Market to a Single-Price Monopoly with the Same

question 117

Multiple Choice

Comparing a perfectly competitive market to a single-price monopoly with the same costs,we see that

• A) both markets are equally efficient in their use of resources.
• B) the monopoly market always is more efficient in the use of resources.
• C) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not.
• D) the monopoly market achieves efficiency in resource use while perfectly competitive market does not.
• E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible.

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Definitions:

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation, with voting rights and a claim on a portion of its profits in the form of dividends.

Preferred Stock

Capital stock that has some preferences over common stock.

Times Interest Earned

A financial ratio that measures a company's ability to meet its interest payments with its earnings before interest and taxes.

Interest Coverage Ratio

A financial metric that measures a company's ability to pay interest on its outstanding debt with its operating income.