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Adam Smith suggested that an invisible had guides market economies.In this analogy,what is the baton that the invisible hand uses to conduct the economic orchestra?


A) the government
B) prices
C) subsidies
D) the Federal Reserve

E) A) and D)
F) All of the above

Correct Answer

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B

The signals that guide the allocation of resources in a market economy are


A) surpluses and shortages.
B) quantities.
C) government policies.
D) prices.

E) A) and C)
F) B) and C)

Correct Answer

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In any economic system,scarce resources have to be allocated among competing uses.Market economies harness the forces of


A) government to allocate scarce resources.
B) supply and demand to allocate scarce resources.
C) credit cards to allocate scarce resources.
D) nature to allocate scarce resources.

E) A) and C)
F) A) and B)

Correct Answer

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B

Suppose the United States had a short-term shortage of farmers.Which mechanisms would adjust to remove the shortage?


A) The government would provide tax incentives to encourage people to become farmers.
B) The government would subsidize the production of food.
C) The prices of food and the wages of farmers would adjust.
D) There are no mechanisms to remove the shortage.

E) A) and C)
F) B) and C)

Correct Answer

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C

Who gets scarce resources in a market economy?


A) the government
B) whoever the government decides gets them
C) whoever wants them
D) whoever is willing and able to pay the price

E) B) and C)
F) A) and D)

Correct Answer

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