Role of Profit in Resource Allocation by Firms
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Questions and Answers

In a planned (command) economic system, who makes all decisions about resource allocation?

  • Government (correct)
  • Producers
  • Market forces
  • Consumers

What is the main principle underlying a planned (command) economic system?

  • Market competition
  • Profit maximization
  • Equity (correct)
  • Efficiency
  • Consumer sovereignty

What led to shortages of some products and surpluses of others in a pure command economy?

  • Market demand
  • Government intervention
  • Price mechanism (correct)
  • Consumer preferences

What is one of the fundamental failings of a pure command economy related to worker productivity?

<p>Incentives for workers to raise productivity (D)</p> Signup and view all the answers

How are decisions made in a planned (command) economic system?

<p>By the government according to a set plan (B)</p> Signup and view all the answers

What is the characteristic of resource allocation in a planned (command) economic system?

<p>Managed by the government (B)</p> Signup and view all the answers

Which economic system allows producers the most freedom to decide what to produce?

<p>Free market economic system (D)</p> Signup and view all the answers

What is the primary motivation for producers in a free market economic system?

<p>Maximizing profit (B)</p> Signup and view all the answers

In a free market economic system, how are resources allocated?

<p>According to producers' self-interest (C)</p> Signup and view all the answers

Which mechanism guides resource allocation in a free market economic system?

<p>Price mechanism (C)</p> Signup and view all the answers

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