In a free-market economy, the price of rice following a surplus is likely to:
A)Increase
B)Decrease
C)Remain unchanged
D)Require intervention

Question

Quizplus · Accepted Answer

In a free-market economy, the price of rice is likely to decrease following a surplus.
Key Takeaway: A free-market economy is based on the free decision making of individuals and organizations with minimal to non-existent interventions by governing bodies and regulators. Therefore, when supplies are in shortage, this market leads to an increase in prices for goods and services. When there is a surplus of supplies, there is likely to be an increase in prices. An equilibrium in prices exists within a free-market economy when supply and demand are matched.

In a Free-Market Economy, the Price of Rice Following a Surplus