Suppose That Firms a and B Each Produce High-Resolution Computer

question 92

Multiple Choice

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.If Firm A produces a monitor that Cassie buys but David does not,then the market outcome illustrates which of the following principles?
(i)
Free markets allocate the supply of goods to the buyers who value them most highly,as measured by their willingness to pay.
(ii)
Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

• A)(i)only
• B)(ii)only
• C)both (i)and (ii)
• D)neither (i)nor (ii)

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Definitions:

Face Amount

The amount specified on the face of a bond and the amount for which it will sell if the market rate of interest equals the contract rate.

Market Rate

The prevailing interest rate or cost of borrowing expressed as a percentage, available in the financial markets.

Economic Conditions

Refers to the state of a country's economy at a certain time, including factors like inflation, unemployment, and GDP growth.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation to each year over the asset's useful life.