When Economists Say That Market Equilibrium Is Consistent with Economic

question 78

Multiple Choice

When economists say that market equilibrium is consistent with economic efficiency, they mean

• A) the total gains from trade (the combined area of producer and consumer surplus) are smaller than potentially could be the case at a different price and quantity.
• B) all units creating more benefit than cost have been produced.
• C) some units have been produced that cost more than the benefits they create.
• D) consumers and producers have made decisions without properly taking into account the market price.

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Definitions:

Process Costing System

A costing method used in industries where production is continuous, assigning costs to units of product based on the process they go through.

Direct Materials

The raw materials that are used directly in the manufacturing of a product and can be easily traced to it.

Journal Entry

A record in the accounting journal that represents a business transaction, including information such as the date, accounts affected, and amounts debited and credited.

Process Costing System

An accounting system used to evaluate the cost associated with a production process that continuously produces homogeneous products.