The logic of the budget constraint dictates that an individual's choice must be a point above the actual budget constraint

Increases in the price level

A) decrease the opportunity cost of holding money. B) increase the quantity of money needed for buying and selling. C) increase the opportunity cost of holding money. D) decrease the quantity of money needed for buying and selling.

Which of the following represents key strengths of the market economy as a system of allocation?

a. Goods and services are allocated based on willingness and ability to pay, rather than based on need. b. Producers have strong incentives to innovate because successful innovators are rewarded with higher profit. c. Since price is freely set based on supply and demand, shortages and surpluses are minimized. d. Both b. and c. above are correct.