When Economists Say That an Activity Meets the Criterion for Economic

question 160

Multiple Choice

When economists say that an activity meets the criterion for economic efficiency, they mean

• A) a majority of citizens favor the activity.
• B) the benefits that result from the activity exceed the costs.
• C) the number of people who gain from the activity exceeds the number on whom costs are imposed.
• D) the costs that result from the activity exceed the benefits.

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Definitions:

Risk-free Rate

The return an investor would expect from an absolutely risk-free investment over a specified period.

Expected Market Rate

The anticipated return on investment in the market based on past trends and future forecasts.

Perpetual Cash Flow

Cash flows that are expected to continue forever, often used in valuation methods for investments with no specific end date.

Listed Beta

The beta value of a stock that is published on financial websites or listed by stock exchanges, representing its volatility.