In a market economy, the three economic questions are answered by which of the following?
A) Prices determined by the interaction of the forces of supply and demand.
B) A cartel of major transnational corporations, government agencies, and consumer advocates.
C) A trilateral commission of major corporations, the military, and elite university professors.
D) A central authority such as people's committee, a government agency, or a dictator.

Question

Quizplus · Accepted Answer

In a market economy, the three economic questions are answered by the interaction of the forces of supply and demand, which determine prices. This means that producers are motivated by profit and consumers are motivated by their own self-interest to make decisions about what to produce, how much to produce, and at what price to sell. As a result, the market economy is driven by the invisible hand of self-interest and competition, rather than by a central authority or government planning. A, prices determined by the interaction of the forces of supply and demand, satisfies this description. B, C and D are incorrect because they involve some sort of central authority which is not part of a market economy.

In a Market Economy, the Three Economic Questions Are Answered