Only One of the Following Statements Is Correct

question 153

Multiple Choice

Only one of the following statements is correct.The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets.Which statement is correct?

• A)Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets.
• B)Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets.
• C)Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets.
• D)Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets.

---

Definitions:

Risk-free Interest Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.

Two-factor Model

A financial model that considers two sources of risk in its valuation or pricing, typically used in evaluating or predicting financial returns.

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.

Interest Rate Risk

The potential for investment losses resulting from changes in interest rates.