One Reason That Deadweight Loss Occurs Is as the Result

question 7

Multiple Choice

One reason that deadweight loss occurs is as the result of

• A) competitive forces pushing the market toward equilibrium.
• B) mutually beneficial transactions not taking place between buyers and sellers.
• C) an increase in total surplus in a market.
• D) an efficient allocation of goods and services in the market.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces the total receivables reported on the balance sheet to reflect the amount that is expected to be uncollectible.

Uncollectible Accounts

Accounts receivable that a company does not expect to collect due to customers' inability to pay.

Percentage of Sales

A financial ratio that helps determine the relative profitability of a product by comparing the percentage of total sales that the product represents.

Aging Analysis

A method used to estimate the collectability of accounts receivable by categorizing them according to their age, usually in 30-day increments.