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Explain How the Free-Market Mechanism Adjusts Prices So That Resource

question 21

Essay

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.


Definitions:

Depreciation Expense

The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.

Working Capital

Current assets minus current liabilities, indicating the liquidity available to a business for day-to-day operations.

Closing Entry

An accounting transaction recorded at the end of an accounting period to transfer the balances of temporary accounts to permanent ones.

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