The figure given below represents the PPC in two nations

Question

The figure given below represents the PPC in two nations - Germany and Korea, producing only two goods, cars and food.Figure 2.4
 
-Given that resources can be allocated by the government, the market, a random process, or on a first-come first-serve basis, which of the following statements is true?
A)The market system is not entirely fair but it creates incentives to increase supplies and improve standards of living. 
B)The random process of allocation allows individuals to acquire purchasing power and enhances the value of the resources that they own. 
C)Since the government system does not distinguish between those who have income and those that do not, government allocation of resources is the most efficient. 
D)There will be no shortages under the first-come first-serve basis of allocation. 
E)A random process of allocation is fair in the sense that everyone gains and there are no losers.

Quizplus · Accepted Answer

The statement that the market system is not entirely fair but it creates incentives to increase supplies and improve standards of living is the most accurate. While the market system may not always result in an equal distribution of resources, it does provide incentives for individuals and firms to produce more, which can lead to higher economic growth and improved living standards overall. The other options are not as accurate or complete in their assessment of resource allocation methods.