Question : Assertion: A market economy is characterized by decentralized decision-making by households and firms.
Reason: In a market economy, the forces of supply and demand determine prices and allocate resources.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Correct Answer: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Solution : The correct answer is (a) Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
The assertion is true. In a market economy, economic decisions regarding resource allocation, production, consumption, and pricing are made by individual households and firms. They have the freedom to make choices based on their own self-interest and preferences, without significant government intervention or control.
The reason provided is a correct explanation of the assertion. In a market economy, prices are determined by the interaction of supply and demand in various markets. The market mechanism, driven by the forces of supply and demand, facilitates the efficient allocation of resources. Prices adjust based on changes in supply and demand, signaling producers and consumers to make decisions that ultimately allocate resources where they are most valued.
Therefore, the correct answer is Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Question : Assertion: Market economy is characterized by decentralized decision-making and private ownership of resources.
Reason: Market economies rely on government intervention to allocate resources efficiently.
Question : Assertion: An oligopoly market structure is characterized by a few large firms dominating the market.
Reason: Oligopolistic firms tend to engage in non-price competition, such as advertising and product differentiation.
Question : Assertion: A command economy is characterized by central planning and government control over resource allocation.
Reason: In a command economy, prices are determined by the government to achieve economic stability.
Question : Assertion: Microeconomics focuses on the individual units of an economy, such as households and firms.
Reason: Microeconomics examines the allocation of resources and the determination of prices in specific markets.
Question : Assertion: Monopolistic competition is characterized by many firms selling similar, but slightly differentiated products.
Reason: Product differentiation in monopolistic competition allows firms to have some control over prices.
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