The Diagram Below Shows the Market Demand Curve and the Cost

question 40

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 marginal-cost pricing.In this case,

• A)allocative efficiency is achieved because profits are maximized.
• B)the result is allocatively inefficient because the firm is suffering losses.
• C)the result is allocatively inefficient because the firm is earning profits.
• D)the result is allocatively inefficient because the marginal cost curve lies below the ATC curve.
• E)allocative efficiency is achieved because price equals marginal cost.

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Definitions:

Multiplicative Relationship

A situation or equation in which one variable increases as a result of increasing another variable by a specific factor or multiplier.

Performance

Relates to the execution and outcome of tasks or actions and is often measured against established standards or objectives.

Ability

The possession of the means or skill to do something.

Motivation

The driving force behind individuals' actions, desires, and needs, propelling them to pursue goals.