A price system is considered to be efficient when
A) it fails to have the goods that consumers want.
B) an underground market develops.
C) all resources are allocated to the highest-valued uses.
D) firms produce more than what consumers want.
Answer: C
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Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why? a. No; average total costs have increased which means the company is not minimizing losses
b. Yes; because average variable costs are always less than average total costs. c. No; because the marginal cost of producing the last unit is the same as the marginal revenue. d. Yes; even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units. e. No; the previous level of output was the most efficient because it had the lowest average total cost.
Economic theory suggests that the standard of living of American workers would rise if
a. technological change increased output per worker. b. the minimum wage were doubled. c. automation were outlawed. d. a larger proportion of the labor force was unionized.