When Economists Say That Market Equilibrium Is Consistent with Economic

question 78

Multiple Choice

When economists say that market equilibrium is consistent with economic efficiency, they mean

• A) the total gains from trade (the combined area of producer and consumer surplus) are smaller than potentially could be the case at a different price and quantity.
• B) all units creating more benefit than cost have been produced.
• C) some units have been produced that cost more than the benefits they create.
• D) consumers and producers have made decisions without properly taking into account the market price.

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Definitions:

Factory Overhead Cost

Indirect costs associated with manufacturing, such as utilities, maintenance, and salaries for managers, that cannot be traced directly to specific products.

Direct Labor Cost

The cost associated with the work done by those actually manufacturing a product or directly providing a service.

Factory Overhead

Refers to all the indirect manufacturing costs, such as utilities and rent for the production facilities, which are not directly tied to individual products.

Total Product Cost

The full cost incurred to manufacture or acquire a product, including material, labor, and overhead expenses, up to the point of sale.