The Diagram Below Shows the Market Demand Curve and the Cost

question 84

Multiple Choice

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12- 6
-Refer to Figure 12- 6.Suppose this firm is being regulated using a policy of average- cost pricing.In this case,

• A)the result is allocatively efficient because economic profits are zero.
• B)the result is as close to the competitive outcome as possible.
• C)the level of output is too low,but the price is allocatively efficient.
• D)the result is allocatively inefficient because price exceeds marginal cost.
• E)the result is allocatively inefficient because the marginal cost curve is downward sloping.

---

Definitions:

Straight-Line Basis

A method of calculating depreciation or amortization by evenly allocating the cost of an asset over its useful life.

Salvage Value

The estimated value remaining in an asset after it has served its purpose.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Useful Life

The estimated time period that an asset is expected to be usable, contributing to the revenue-generating activities of a business.