When the Price System Fails to Generate an Efficient Allocation

question 144

Multiple Choice

When the price system fails to generate an efficient allocation of resources

• A) the market will always correct it.
• B) consumers will spend less.
• C) business will produce more.
• D) too few or too many goods will be produced.

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Definitions:

Total Cost

The total amount of money spent on creating goods or services, encompassing both constant and fluctuating expenses.

Implicit Cost

Represents the opportunity costs of using resources owned by the firm for its own production processes, without direct payment.

Interest Income

The income earned from lending funds or investing in interest-bearing financial instruments, such as saving accounts, bonds, or loans.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding costs related to production.