Quiz 5.1 - Price system, definition and ObjectivesRename

The price system is also known as:

Market mechanism

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Command system

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Traditional system

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Socialist system

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In a free market economy, prices are mainly determined by:

Government policy

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Demand and supply

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Producers alone

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Consumers alone

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Which of the following is NOT a function of the price system?

Rationing scarce resources

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Providing incentives

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Equal distribution of income

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Signaling changes in demand and supply

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When demand for a good increases, the price system ensures that:

Prices fall

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Prices rise

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Quantity supplied falls

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Market disappears

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The price system allocates resources to areas where:

Production is least profitable

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Producers are subsidized

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Consumers show the highest willingness to pay

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Government commands

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Which economist is most closely associated with the idea of the price system and the ‘invisible hand’?

Karl Marx

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John Maynard Keynes

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Adam Smith

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Alfred Marshall

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In the price system, a shortage of goods usually leads to:

Lower prices

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Higher prices

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Elimination of demand

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Government intervention

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One of the major weaknesses of the price system is that it:

Encourages efficiency

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Responds to consumer choices

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Creates income inequality

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Signals producers about demand changes

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Which of the following best describes the rationing function of prices?

Prices encourage production of more goods

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Prices limit the quantity demanded when supply is scarce

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Prices guarantee equal access to all consumers

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Prices always remain constant in the market

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In a mixed economy, the price system works along with:

Government planning

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Custom and tradition

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Complete anarchy

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Barter system

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Quiz 5.1 – Price system, definition and ObjectivesRename

Quiz 5.1 – Price system, definition and ObjectivesRename

ola September 16, 2025

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