The Diagram Below Shows the Market Demand Curve and the Cost

question 72

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

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Definitions:

Long-Term Financing

A method of financing that is typically used for investments or purchasing assets that have a lifespan of more than a year.

Human Resources Department

The division within a business that manages employee relations, recruitment, training, and benefits.

Employment

A relationship between an employer and an employee where the employee provides labor in exchange for compensation under agreed terms.

Warranty Expense

Costs anticipated by a company for the repair or replacement of defective products during the warranty period, treated as a liability until used.