Allocative Efficiency Occurs When

question 5

Multiple Choice

Allocative efficiency occurs when

• A)producer surplus is maximized.
• B)consumer surplus is maximized.
• C)the sum of consumer and producer surplus is maximized.
• D)the economy achieves the frontier of the production possibilities boundary.
• E)deadweight loss is achieved.

---

Definitions:

Incremental Cash Flows

The additional cash flow generated by a company as a result of undertaking a new project or investment.

Operating Lease

A lease agreement for the use of an asset without transferring ownership, typically involves short-term leases of equipment or property.

Fair-Market Value

An estimate of the market value of a property or asset, based upon what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

CICA

Canadian Institute of Chartered Accountants, an organization for accounting professionals in Canada. (Note: as of 2023, CICA has amalgamated into CPA Canada).