Resource Allocation in Economics
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Questions and Answers

Why is resource allocation a critical problem in economies?

  • Because the wants of the members of the society are limited
  • Because the resources of a society are unlimited
  • Because the government controls the allocation of resources
  • Because the resources of a society are limited in supply, whereas the wants of the members are unlimited (correct)

    • What is the primary goal of resource allocation in an economy?

  • To maximize profit for private companies
  • To provide equal distribution of resources to all members of society
  • To allocate resources according to government priorities
  • To minimize waste and inefficiency (correct)

    • What determines the allocation of resources in the private sector?

  • Government revenue and expenditure activities
  • Government budgeting and consumer needs
  • Consumer sovereignty and producer profit motives
  • Market supply and demand, and price mechanism (correct)

    • What type of goods will not be produced in sufficient quantities by the market?

    <p>Both public and merit goods</p> Signup and view all the answers

    What determines the allocation of resources in the public sector?

    <p>Government revenue and expenditure activities</p> Signup and view all the answers

    What is allocative efficiency concerned with?

    <p>Utilizing limited resources to produce goods and services that maximize value to the society</p> Signup and view all the answers

    What is a necessary condition for efficient allocation of resources in an economy?

    <p>Perfect competition and rational choices by economic agents</p> Signup and view all the answers

    What is a reason for market failures leading to misallocation of resources?

    <p>Imperfect competition and presence of monopoly power</p> Signup and view all the answers

    What is an example of a good that markets may fail to provide?

    <p>Collective public goods like defense</p> Signup and view all the answers

    What is the result of imperfect competition and presence of monopoly power in a market?

    <p>Higher prices and under-production</p> Signup and view all the answers

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