In the Absence of Market Failures, Allocative Efficiency Is Achieved

question 61

Multiple Choice

In the absence of market failures, allocative efficiency is achieved only under perfect competition because only this market structure results in

• A) productive efficiency.
• B) P = MC.
• C) complete freedom of entry and exit.
• D) zero long- run profits.
• E) maximization of profits through competition.

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Definitions:

Unit-level Activity

Operations or activities performed on individual units or items within a production process.

Activity-based Costing

Activity-based costing (ABC) is an accounting methodology that assigns costs to products and services based on the resources they consume.

Costs Of Quality

The total costs associated with preventing, detecting, and correcting defective work, divided into prevention costs, appraisal costs, and failure costs.

Unit-level Activities

Tasks or operations that vary directly with the number of units produced or services rendered.