Economics (AS & A Level) · Feb / March 2023 · Paper 32 · Question 4
9708Efficiency and market failure
What is likely to help create dynamic efficiency?
- AEntry barriers are reduced to increase competition in the market.
- BFirms are legally bound to produce where price equals marginal cost.
- CTaxes on profits are raised to encourage firms to produce where price equals average cost.
- DTaxes on retained profits are reduced to encourage investment in new technology.
As printed in the paper
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Correct answer: D. Taxes on retained profits are reduced to encourage investment in new technology.
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