Which of the Following Statements About Free-Market Economies Is False

question 43

Multiple Choice

Which of the following statements about free-market economies is false?

• A)An efficiently functioning market economy will correct temporary shortages and surpluses.
• B)Markets tend to be impersonal and to decentralize economic power.
• C)The government has a role to play in correcting market failures.
• D)In a free-market economy there is no role for government intervention.
• E)The existence of profits and losses provides signals to other economic agents.

Analyze how market demand influences firm and industry supply in a competitive market.

Explain the principle of profit maximization and its application in perfectly competitive markets.

Recognize the effects of market changes (e.g., entry/exit of firms, demand shifts) on firm strategies and market equilibrium.

Understand the role of production costs in determining firm behavior and market outcomes.

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Definitions:

Concurrent Validity

The extent to which test scores correlate with scores of an established test of the same construct administered at the same time.

Internal Consistency

The extent to which different test items that propose to measure the same general construct obtain similar scores.

Odd-even Reliability

A measure of internal consistency reliability, where a test is split into odd and even items and the scores are correlated.

Construct Validity

The degree to which a test measures what it claims to be measuring, specifically in terms of whether the test actually assesses the theoretical construct it is designed to measure.