Which of the Following Statements Is True

question 44

Multiple Choice

Which of the following statements is true?

• A) Production in a perfectly competitive market is efficient because resources in the market leave those sectors in which price cannot cover their costs of production and enter those sectors in which price can cover their costs of production.
• B) Production in a perfectly competitive market is suboptimal because the absence of free entry and exit of firms allows firms to specialize in only one particular industry.
• C) Production in a perfectly competitive market is Pareto inefficient because the government or a central planner carefully analyzes the needs and requirements of society and instructs firms on what to produce and in what quantity.
• D) Production in a perfectly competitive market is Pareto efficient because the government or a central planner carefully analyzes the needs and requirements of society and instructs firms on what to produce and in what quantity.

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Definitions:

Perfectly Elastic

A situation where the quantity demanded or supplied changes infinitely in response to any change in price.

Total Revenue

The overall income generated by a business through the sale of goods or the delivery of services within a certain period.

Elasticity of Demand

Elasticity of Demand measures how much the quantity demanded of a good responds to a change in the price of that good, indicating how sensitive consumers are to price changes.

Necessity

An essential requirement or need for something.