A Friend of Yours Asks You Why Market Prices Are

question 83

Multiple Choice

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

• A)the value of a good to society,but not the cost of making it.
• B)the cost of making a good to society,but not its value.
• C)both the value of a good to society and the cost of making it.
• D)neither the value of a good to society nor the cost of making it.

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Definitions:

Consolidated Financial Statements

Financial statements that combine the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries.

Tax Rate

The rate at which taxes are levied on an individual or a corporation's income.

Consolidated Tax Returns

A single tax return filed by a parent company and its subsidiaries as one taxpayer to IRS, consolidating their tax liabilities.

Income Tax Liability

The total amount of income tax owed to the government within a fiscal year.