At what point must a firm produce to achieve allocative efficiency ?
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Answer: C. The price equals the average cost
Explanation
Allocative efficiency requires price to equal marginal cost, though option C is marked in the dataset key.
Related questions
Q1. What steps are required to determine the correct level of GNP ?
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Answer: A. To add up the values of goods and services for one year
Gross National Product is calculated by summing the total value of all final goods and services. Option A correctly identifies this core national income accounting methodology. It measures the total economic output produ...
Q2. Governments should pursue all of the following to boost growth EXCEPT ?
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Answer: C. nationalize major industries
Nationalizing major industries typically stifles competition and efficiency, making it an exception to growth-promoting policies. State-owned monopolies often suffer from bureaucratic inefficiencies and lack incentives f...
Q3. How do you adjust Gross National Product to obtain Net National Product ?
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Answer: C. Deduct subsidies
Net National Product is calculated by deducting depreciation (capital consumption allowance) from Gross National Product.
Q4. At what maximum output level should a firm produce to maximize growth without incurring a loss ?
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Answer: C. Marginal revenue equals marginal cost
Profit maximization and standard economic equilibrium occur where marginal revenue equals marginal cost. Option C correctly identifies this foundational rule for optimal firm production levels. Producing beyond this poin...
Q5. What public policy response appropriately internalizes a negative externality ?
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Answer: C. tax the good
Imposing a tax equal to the external cost internalizes negative externalities by making producers account for social costs. This Pigovian tax shifts the private supply curve upward until it aligns with the true social co...
Q6. Why has Japan restricted U.S. car and farm product imports ?
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Answer: B. a favorable balance of trade
Import restrictions are often implemented by nations to protect domestic industries and trade. Option B correctly identifies the desire for a favorable balance of trade as a motive. Limiting foreign imports helps reduce...