Which statement is correct?
A)In a market system, buyers and sellers must be in face-to-face contact with each other.
B)Prices affect the distribution of goods in a market system but not the allocation of resources.
C)In a market system, prices serve to ration goods and services to consumers.
D)The operation of a market system has little, if any, effect on the distribution of income in the economy.

Question

Quizplus · Accepted Answer

In a market system, prices serve as signals to both buyers and sellers about the availability and demand for goods and services. This, in turn, results in rationing of goods and services to those who are willing and able to pay the market price. Therefore, option C correctly states that prices serve to ration goods and services in a market system. Options A and B are incorrect as they make incorrect assumptions about the nature of a market system. Option D is also incorrect as the operation of a market system affects the distribution of income in the economy by influencing the wages and profits earned by different individuals and firms.

Which Statement Is Correct