An Economy Will Be Allocatively Efficient If

question 97

Multiple Choice

An economy will be allocatively efficient if

• A) imperfectly competitive markets are regulated.
• B) the economy's resources are fully employed.
• C) least- cost production techniques are employed by all firms.
• D) the marginal cost equals price for all goods.
• E) the marginal costs of all firms in an industry are equal.

---

Definitions:

Variable Costs

Expenditures that adjust in relation to the level of production.

Fixed Costs

Costs that do not vary with the level of output produced by a firm, such as rent, salaries, and insurance premiums.

Profit

The financial gain obtained when the revenue from a business activity exceeds the expenses, costs, and taxes.

Variable Costs

Costs that change in proportion to the level of production or business activity, such as raw materials and direct labor.