The text states: "The great economic problem is to arrange our limited resources to satisfy as many of our wants as possible." How does a market achieve this goal?
A) It chooses central planners who are experts at identifying the best uses of resources.
B) The forces of demand and supply use prices as a signaling device that directs resources to their highest-value uses.
C) It ensures that prices provide an even signal by making sure prices across all markets are equal.
D) It offers resource-based futures contracts.

Question

Quizplus · Accepted Answer

In a market, the forces of demand and supply work together to determine the price of goods and services. Prices act as signaling devices by providing information on the scarcity or abundance of a particular good or service. As a result, resources are directed towards the highest-value uses, enabling the economy to achieve the goal of satisfying as many wants as possible with limited resources. Choice A is incorrect because central planning does not allow for the decentralized decision-making necessary to allocate resources efficiently. Choice C is incorrect because even in a market economy, prices will vary due to differences in supply and demand across different markets. Choice D is incorrect because resource-based futures contracts are a financial instrument that allows for the hedging of risk associated with price fluctuations, but they do not directly help in the efficient allocation of resources.

The Text States: "The Great Economic Problem Is to Arrange