Which Assumption(s) Is (Are) Necessary for an Efficient Allocation of Resources

question 173

Multiple Choice

Which assumption(s) is (are) necessary for an efficient allocation of resources among firms?

• A) Factor markets are open and competitive.
• B) All firms pay the same prices for inputs.
• C) Firms behave so as to maximize their profits.
• D) All of the above are correct.

---

Definitions:

Marginal Cost

The cost of producing one additional unit of a good or service, taking into account factors that vary with production levels.

Average Cost

The total cost of production divided by the number of units produced, indicating the cost per unit of output.

Rent-Seeking Behavior

Activities aimed at increasing one's share of existing wealth without creating new wealth, often through manipulating the social or political environment.

Net Social Gain

The total benefit to society from producing and consuming a good or service, taking into account both the private benefits and costs and any external benefits or costs.