Economic efficiency is ___________________unless funds flow to the location with the ____ risk-adjusted return.
A) less than the maximum possible, highest
B)less than the maximum possible, lowest
C)eliminated, zero
D)eliminated, highest

Question

Quizplus · Accepted Answer

Economic efficiency means maximizing the output with the given input. In order to maximize output, funds need to be allocated to the location with the highest risk-adjusted return, as it offers the highest potential return for the given level of risk. Therefore, economic efficiency is not achieved unless funds flow to the location with the highest risk-adjusted return. Option A is the correct answer as it highlights that economic efficiency is not achieved when funds flow to the location with the lowest risk-adjusted return.

Economic Efficiency Is ___________________Unless Funds Flow to the Location with the ____

Economic Efficiency Is _______________Unless Funds Flow to the Location with the