The Function of Price in a Market Economy Is to

question 126

Multiple Choice

The function of price in a market economy is to

• A)make producers wealthy at the expense of consumers.
• B)provide information to producers and consumers.
• C)provide a base on which government can build a tax system.
• D)prevent market adjustment from being necessary.
• E)cause consumers to be certain that they desire a product before they buy it.

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Definitions:

Welfare Economics

Normative evaluation of markets and economic policy.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and quantities.

Efficient

Refers to a level of performance that uses the least amount of inputs to achieve the highest amount of output.

Utility Possibilities Frontier

A curve that shows the maximum feasible amount of two goods that can be produced with available resources and technology, indicating the trade-offs and efficiency in production.