A Friend of Yours Asks You Why Market Prices Are

question 94

Multiple Choice

A friend of yours asks you why market prices are better than government-determined prices. What do you say?

• A) Because they generally reflect the value of a good to society, but not the cost of making it.
• B) Because they generally reflect the cost to society of making a good, but not its value.
• C) Because they generally reflect both the value of a good to society and the cost of making it.
• D) Because they generally reflect neither the value of a good to society nor the cost of making it.

---

Definitions:

Incremental Changes

Small or minimal adjustments or changes that are made to improve a process, product, or system over time.

Replacement Projects

Projects undertaken by a company to replace old or obsolete assets in order to maintain or improve current operations.

Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health and efficiency.

Corporate Tax Rate

A percentage of a corporation's profits taken as tax by the government.