When There Are Only Perfectly Competitive Producers in a Market

question 38

Multiple Choice

When there are only perfectly competitive producers in a market economy, there will be an efficient allocation of resources (ignoring externalities) because:

• A)even though excess profits are earned in some industries, capital is prevented from moving into those industries.
• B)even though excess profits are earned in some industries, there will be excess losses earned in other industries.
• C)some firms will produce too little output and other firms will produce too much output.
• D)the prices of goods will tend to reflect their marginal costs of production.
• E)none of the above.

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Definitions:

Fixed Costs

Unchanging costs associated with operation, irrespective of production or sales levels, such as expenses for premises, staff remuneration, and insurance protection.

Fixed Expenses

Costs that remain constant regardless of the level of production or sales activities, such as rent or salaries.

Net Operating Income

is the profit a company generates from its operations, excluding taxes and interest, focusing on the core business activities.

Obsolete Desk Calculators

Outdated calculating tools that have been replaced by more modern devices but might still be found in storage or used in niche scenarios.