Question : In a free-market economy the allocation of resources is determined by
Option 1: voting is done by consumers
Option 2: a central planning authority
Option 3: consumer preferences
Option 4: the level of profits of firms
Correct Answer: consumer preferences
Solution : The correct answer is (c) consumer preferences.
In a free-market economy, resources are allocated through the interaction of supply and demand. The demand for a good or service is determined by the number of people who want to buy it, and the supply is determined by the number of people who are willing to sell it. The price of a good or service is determined by the intersection of supply and demand. Consumer preferences play a key role in determining the allocation of resources in a free-market economy. When consumers demand more of a good or service, the price of that good or service will rise. This will signal to producers that they should produce more of that good or service, as there is a profit to be made.
Question : Allocation of resources in a market economy is guided by
Option 1: Planning mechanism
Option 2: Market mechanism
Option 3: Government
Option 4: None of these
Question : Consumer sovereignty means:
Option 1: consumer are free to spend their income as they like
Option 2: consumer has the power to manage the economy
Option 3: Expenditures of consumers influence the allocation of resources
Option 4: Consumer goods are free from government control
Question : Administered prices refer to:
Option 1: Prices are determined by forces of demand and supply.
Option 2: Prices determined by sellers in the market
Option 3: Prices determined by an external authority which is usually the government
Option 4: None
Question : -----is nothing more than consumers' willingness to buy goods and services according to their preferences, needs, and budget.
Option 1: The behavior of a consumer
Option 2: Consumer interest
Option 3: Consumer perception
Option 4: Consumer attitude
Question : A 'Market Economy' is one in which
Option 1: is controlled by the government
Option 2: is free from the government control
Option 3: is influenced by international market forces
Option 4: All of these
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