If a Purely Competitive Firm Is Producing Where Price Exceeds

question 17

Multiple Choice

If a purely competitive firm is producing where price exceeds marginal cost, then

• A)the firm will fail to maximize profit, but resources will be efficiently allocated.
• B)the firm will fail to maximize profit and resources will be overallocated to the product.
• C)the firm will fail to maximize profit and resources will be underallocated to the product.
• D)resources will be underallocated to the product, but the firm will maximize profit.

---

Definitions:

Perpetual Inventory System

An accounting approach that continuously updates inventory records after each transaction, providing a real-time view of inventory levels.

Liability Credited

A credit entry in accounting representing an increase in liabilities, reflecting that a company has received something of value for which it must pay in the future.

Asset Debited

An accounting entry that increases the value of an asset account.

F.O.B. Destination

A shipping term indicating that the seller bears the shipping costs and maintains ownership and responsibility for the goods until they are delivered to the buyer's specified location.