An Economy Will Be Allocatively Efficient If

question 96

Multiple Choice

An economy will be allocatively efficient if

• A)the economy's resources are fully employed.
• B)all firms are breaking even.
• C)the average cost of production is the lowest possible for all goods produced.
• D)price equals marginal cost for all products.
• E)the price equals average cost for all goods.

---

Definitions:

Security Market Line

A graphical representation used in the Capital Asset Pricing Model (CAPM) that shows the relationship between the expected return of an investment and its risk.

Black, Jensen, and Scholes

Refers to the authors of a landmark study in finance, particularly known for their work related to the capital asset pricing model (CAPM) and option pricing theory.

CAPM

The Capital Asset Pricing Model is a financial model that describes the relationship between systemic risk and expected return for assets, particularly stocks.

Security Market Line

A graphical representation of the Capital Asset Pricing Model, showing the relationship between the expected return of an investment and its risk.