Which of the Following Is Necessary for Allocative Efficiency to Be

question 324

Multiple Choice

Which of the following is necessary for allocative efficiency to be achieved?

• A) Marginal benefit must be maximized.
• B) Marginal cost must be minimized.
• C) Marginal benefit must equal marginal cost.
• D) The difference between marginal benefit and marginal cost must be maximized.
• E) Production must be at a point inside the production possibilities frontier.

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Definitions:

Total Market Value

The combined market price or value of all of a company's outstanding shares, reflecting its overall market capitalization.

Post-Split Price

The new stock price following a stock split, adjusted to reflect the increase in the number of shares without altering the company's market capitalization.

Residual Dividend Policy

A strategy where dividends paid to shareholders are based on earnings left after all operational and expansion financing needs are met.

Target Capital Structure

The mix of debt, preferred stock, and common equity that a company aims to hold to minimize its cost of capital.