It May Be Said That the Price System

question 23

Multiple Choice

It may be said that the price system

• A) is the only feasible method of allocating resources.
• B) operates only in a laissez- faire economy.
• C) is automatic, although it does not function perfectly.
• D) is automatic and functions perfectly in reallocating economic resources.
• E) depends on planned coordination between firms and governments.

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Definitions:

Stock Split

A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the market capitalization remains the same.

Market Price

Market price is the current value at which an asset or service can be bought or sold in a marketplace.

Shares Outstanding

Represents the total number of shares of stock that are currently owned by the company's shareholders, including shares held by institutional investors and restricted shares owned by the company’s officers and insiders.

Retained Earnings Statement

A financial statement that shows how a company's retained earnings have changed during a specific period.