In a Purely Competitive Industry, an Optimal Allocation of Scarce

question 115

Multiple Choice

In a purely competitive industry, an optimal allocation of scarce resources occurs when

• A)P = AC.
• B)P = MC.
• C)MR = AC.
• D)TR = TC.

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Definitions:

Checkable Deposits

Bank accounts on which checks can be drawn. These include checking accounts and demand deposits that allow owners to write checks against their account balances.

Excess Reserves

Funds that banks hold over and above the regulatory requirement, which can influence the bank's ability to lend and the overall money supply.

Required Reserve Ratio

The fraction of deposits that banks are required to hold in reserve and not lend out, set by the central bank.

Required Reserves

This refers to the minimum amount of funds that a bank must hold in reserve against deposit liabilities, as mandated by central banking authorities.