Which of the following is a key criticism of the market economy as a system of allocation?
a. Goods and services are allocated unequally based on ability to pay.
b. Producers have strong incentives to innovate because successful innovators are rewarded with higher profit.
c. Consumers can transmit their preference for product quality and variety by way of their "dollar votes" cast in the marketplace. Since price is freely set based on supply and demand, there are few shortages or surpluses.
d. None of the above.
a
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How wages are determined is best described by
A. political and social forces (such as unions) only. B. economic factors only. C. government regulation only. D. economic factors, with strong influences by political and social forces (such as unions).
According to the classical model, prices and wages
A) must be set by government. B) move upward easily, but are "sticky" downward. C) are flexible. D) move downward easily, but are "sticky" upward.
Which of the following statements is false?
A. As the price paid for a bond rises, the yield declines. B. If you purchase stock from an individual that currently owns the stock, you are buying it in the secondary market. C. The yield on a bond is another term for the coupon rate on a bond. D. A rating of Aaa from Moody's is the highest bond rating given by that rating agency.
If a good is inferior and its price increases,
a. the income effect will be positive and the substitution effect will be positive. b. the income effect will be negative and the substitution effect will be negative. c. the income effect will be positive and the substitution effect will be negative. d. the income effect will be negative and the substitution effect will be positive.