Freely Functioning Markets

question 17

Multiple Choice

Freely functioning markets

• A) always produce an efficient allocation of resources.
• B) may be unfair due to significant income disparities that result.
• C) have no need for government intervention.
• D) All of the above are correct.

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Definitions:

Allowance Account

An accounting reserve set up to account for future adjustments such as bad debts or product returns.

Direct Write-off Method

An accounting method where uncollectible accounts receivable are directly written off against income at the time they are deemed non-collectable.

Allowance for Doubtful Accounts

An accounting provision representing the estimated portion of receivables that may not be collected.

Accounts Receivable

Represents money owed to a company by its customers for goods or services delivered but not yet paid for.