PRC-3 · Chapter 9 · Question 22 of 45
Which of the following is a primary characteristic of a purely Capitalist or Free Market Economy?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Resource allocation entirely determined by the price mechanism
Explanation
In a free market economy, the forces of supply and demand (the price mechanism) dictate what, how, and for whom to produce without government intervention.
More Nature and Scope of Economics MCQs
- Q24If an economy discovers a massive new oil reserve within its borders, how will this affect its Production Possibility Frontier (PPF)?
- Q25When a country suffers from widespread unemployment and factory closures, where is it operating in relation to its Production Possibility…
- Q26In the circular flow of income model, which of the following strictly constitutes an 'injection' into the domestic economy?
- Q27According to the circular flow model, when total leakages (S + T + M) perfectly equal total injections (I + G + X), the economy is in a…
- Q28Which factor of production encompasses all naturally occurring resources, such as fertile soil, minerals, water, and forests?