When Resources Are Misallocated, or Allocated Inefficiently

question 104

Multiple Choice

When resources are misallocated, or allocated inefficiently,

• A) market failure occurs.
• B) then there must be external costs or benefits in production.
• C) then it must be the case that there is imperfect information in the market.
• D) then it must be the case that the good is a public good.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account on a company's balance sheet that represents the amount of receivables the company expects may not be collected due to customer defaults.

Contra Asset

An account listed in a company's balance sheet that is used to reduce the balance of a related asset account, showing the amount that effectively reduces the original asset's value.

Maturity

The time at which a financial obligation must be repaid or settled in full.

Notes Receivable

Financial assets representing amounts owed to a company by others, typically from loans or credit extended, evidenced by promissory notes.