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:

Time Deposit

A deposit in a financial institution that requires notice of withdrawal or must be left for some fixed period of time.

Junk Bonds

High-risk, high-yield bonds issued by companies with lower credit ratings, reflecting a greater risk of default but offering higher returns to compensate investors.

Real Estate Prices

The amount of money required to purchase ownership or rental rights to land and buildings.

Bank Interest Rates

The percentage charged on loans or paid on savings by banks to customers.