In a market system, decisions about how to allocate resources are made:
A)by central planning boards in each industry.
B)by a lottery system.
C)by individuals and firms interacting in markets coordinated by market prices.
D)by large conglomerates working cooperatively with the government.
E)based upon tradition.

Question

Quizplus · Accepted Answer

In a market system, decisions about how to allocate resources are made by individuals and firms interacting in markets coordinated by market prices. The market price system responds to the wants and needs of consumers and producers, and resources are allocated according to the signals given by prices. This promotes efficiency and productivity by encouraging producers to supply goods and services that are in demand while discouraging the production of goods and services that are not wanted. Central planning boards, lotteries, large conglomerates working cooperatively with the government, and tradition do not play a significant role in the allocation of resources in a market system.

In a Market System, Decisions About How to Allocate Resources