In a Free- Market Economy That Is Continually Adjusting Toward

question 9

Multiple Choice

In a free- market economy that is continually adjusting toward equilibrium,a primary force driving this adjustment is

• A)the pursuit of allocative efficiency.
• B)diminishing returns.
• C)the scarcity of resources.
• D)opportunity costs.
• E)the pursuit of profits.

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Definitions:

Missed Opportunities

Potential benefits or gains that are forfeited when a choice is made over alternative options.

Quota Rents

Revenue earned by the holder of import quotas, calculated by the difference between the domestic price and the world price of the imported goods.

Equalibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.

Binding Price Ceiling

A government-imposed price limit that is set below the equilibrium price, causing a shortage of the product because demand exceeds supply.