In a Market System, How Are the Price Signals Established

question 258

Multiple Choice

In a market system, how are the price signals established?

• A) Consumer advocacy groups establish fair prices for items, and most firms follow these pricing guidelines because they don't want to anger their consumers.
• B) Industry associations establish an acceptable price range for each commodity sold within the industry, and member firms are obligated to abide by association guidelines.
• C) The forces underlying supply and demand interact to determine a market clearing price.
• D) Federal legislation establishes maximum prices for most goods, and state governments regulate the prices of any remaining items.

---

Definitions:

Personal-use Asset

An asset primarily used for personal enjoyment or living purposes, not for business or investment aims.

Like-kind Exchange

A tax-deferred transaction allowing for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first asset.

Installment Method

A tax procedure that allows the taxpayer to spread the income and taxes owed on the sale of property over the period in which the payments are received.

Gross Profit Percentage

A financial ratio showing the proportion of money left over from revenues after accounting for the cost of goods sold.