In a Market Economy

question 18

Multiple Choice

In a market economy,

• A) there is a fixed economic pie to be divided among individuals.
• B) differences in incomes provide individuals with an incentive to supply resources that are highly valued by others.
• C) a central distributing agency carves up the economic pie and allocates slices to individuals.
• D) both a and b above are true.

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Definitions:

Common Resources

Goods that are non-excludable and rivalrous, meaning they are available to all but can be depleted by overuse.

Marginal Social Cost

This refers to the entire cost society bears for the production of an additional unit of a good, including both private costs borne by producers and external costs absorbed by others.

Common Resource

A resource like air or water that is non-excludable and rivalrous, meaning it's difficult to prevent anyone from using it, and one person's use diminishes others' use.

Common Resource

A resource like air or water that is not owned by anyone, but can be used freely by the public, often leading to overuse and depletion.