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    Question

    In a market economy 

    A demand determines supply and supply, in turn, determines prices Correct Answer Incorrect Answer
    B supply determines demand and demand, in turn, determines prices Correct Answer Incorrect Answer
    C supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources Correct Answer Incorrect Answer
    D the allocation of scarce resources determines prices and prices, in turn, determine supply and demand Correct Answer Incorrect Answer
    E none of these Correct Answer Incorrect Answer

    Solution

    In a market economy, forces of market interact (demand and supply) to determine prices and prices in turn allocate the economy’s scarce resources.

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