Perfectly Competitive Factor and Output Markets That Satisfy the Efficiency

question 124

Multiple Choice

Perfectly competitive factor and output markets that satisfy the efficiency condition are similar in that both generate:

• A) an underproduction of output.
• B) an overproduction of output.
• C) market prices that are greater than opportunity costs.
• D) market prices that are equal to opportunity costs.

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Definitions:

Budget Line

A graphical representation that shows all possible combinations of two goods that can be purchased with a given income and prices.

Commodity 1

A generic term for a raw material or primary agricultural product that can be bought and sold, such as copper or coffee.

Commodity 2

Typically refers to a basic good used in commerce that is interchangeable with other goods of the same type.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can afford given their income and the prices of the goods.