The Text States: "The Great Economic Problem Is to Arrange

question 219

Multiple Choice

The text states: "The great economic problem is to arrange our limited resources to satisfy as many of our wants as possible." How does a market achieve this goal?

• A) It chooses central planners who are experts at identifying the best uses of resources.
• B) The forces of demand and supply use prices as a signaling device that directs resources to their highest-value uses.
• C) It ensures that prices provide an even signal by making sure prices across all markets are equal.
• D) It offers resource-based futures contracts.

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Definitions:

Marginal Cost

The expenditure associated with creating another single unit of a product or service.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced, illustrating the per-unit variable cost.

Total Cost

The sum of all expenses incurred in the production of goods or services, including fixed and variable costs.

Labor Productivity

Total output divided by the quantity of labor employed to produce it; the average product of labor or output per hour of work.