CA Foundation P4 · Chapter 1 · Question 7 of 15
In a capitalist economy, the allocation of resources is primarily guided by:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The price mechanism operating through free markets
Explanation
Under capitalism, decisions about what, how and for whom to produce are taken through the interaction of demand and supply in markets, i.e., the price mechanism. A central planning authority is the hallmark of a socialist economy, while tradition-based allocation describes a traditional economy.
More Nature and Scope of Business Economics MCQs
- Q9Which of the following is commonly cited as a major demerit of a capitalist economy?
- Q10Mr. Rao runs a business in his own building, which could otherwise be rented out for Rs. 2,40,000 a year. He has invested Rs. 10,00,000 of…
- Q11Economics defined as 'the science which studies human behaviour as a relationship between ends and scarce means which have alternative…
- Q12Which of the following falls within the macroeconomic (external) scope of Business Economics?
- Q13A production possibility curve is usually concave (bowed out) to the origin because: