When Investment Funds Are Allocated by Government Rather Than by Markets

question 34

Multiple Choice

When investment funds are allocated by government rather than by markets,

• A) profitable investments are more likely to take place.
• B) political influence replaces market return as the basis for allocating funds.
• C) funds will consistently be channeled into wealth-creating projects.
• D) projects that are political boondoggles will be unlikely to be undertaken.

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Definitions:

Total Costs

The complete sum of expenses incurred in the production of goods or services, including both fixed and variable costs.

Perfectly Competitive

A market structure where there are many buyers and sellers, products are identical, and there is free entry and exit in the market.

Production Technology

The quantitative relationship between inputs and outputs.

Input Demand

Input demand refers to the quantity of goods and services a firm requires to produce its own products, often influenced by the price of these inputs and the firm's level of output.