Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

question 386

Multiple Choice

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
-As shown in Exhibit 3A-1, if the market price falls from $2.00 to $1.00, then:

• A) total surplus increases.
• B) deadweight loss increases.
• C) overproduction decreases.
• D) underproduction decreases.

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Definitions:

Acid-Test Ratio

Acid-test ratio is a financial metric used to determine a company's short-term liquidity position by comparing its most liquid assets to its current liabilities.

Accounts Receivable Turnover

A financial ratio indicating how many times a company's receivables are turned over and collected in cash during a period.

Current Ratio

A liquidity ratio that measures a company’s ability to pay short-term and long-term obligations, calculated as current assets divided by current liabilities.

Total Current Assets

The sum of all assets likely to be converted into cash within a year, including cash, marketable securities, accounts receivable, and inventory.