Price is important in a market economy because it
a. eliminates imbalances between supply and demand.
b. serves as the rationing mechanism for the limited supplies of goods and services.
c. coordinates the choices of consumers and producers and brings them into harmony.
d. is all of the above.
D
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Refer to the figure above. What is the social surplus if the market is in equilibrium?
A) $50 B) $75 C) $100 D) $150
If a local shop buys a used motorcycle for $1,000, makes repairs and refurbishes it, then resells it for $2,500, the
a. shop contributes value added equal to $1,500, but nothing is added to GDP. b. shop contributes value added equal to $1,500, and consequently $1,500 is added to GDP. c. shop contributes nothing to production because only existing goods are involved. d. shop contributes value added equal to $2,500, but only $1,500 is added to GDP.