11 mark
What is a function of the price mechanism?
to allocate goods and services
to calculate national expenditure
to ensure an equal distribution of income
to guide government policy decisions
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The Role of Markets in Allocating Resources (Cambridge (CIE) IGCSE Economics)
Exam Questions
49 mins25 questions21 mark
Who determines what goods and services are produced in a market economy?
consumers
employees
government
trade unions
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31 mark
What do markets use to facilitate the allocation of resources?
Government-imposed quotas
Centralised government planning
Supply and demand
The basic economic problem
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41 mark
What is the primary role of markets in allocating resources in a market economy?
Setting government-imposed price controls
Distributing resources based on political decisions
Allowing buyers and sellers to interact and determine prices
Prioritising the needs of the wealthiest consumers
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51 mark
In a market economy, which factor most determines the allocation of resources?
Centralised government planning
Individual consumer preferences and choices
The influence of public corporations
The imposition of government taxes
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11 mark
Why might a market economy fail to achieve the best use of scarce resources?
Consumers may lack information about which good to buy.
Demerit goods are underconsumed.
Public goods are overconsumed.
Most resources are owned by the government.
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21 mark
What necessarily describes the market system?
an economy with both a private and public sector
limited resources but unlimited wants
resources are allocated through demand and supply
when all resources are used to produce consumer goods
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31 mark
What role do prices play in the market's allocation of resources?
Prices reflect only the costs of production
Prices act as a means of control by the government
Prices provide signals about the relative scarcity of goods
Prices solely benefit producers, not consumers
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41 mark
Which is not one of the three questions that needs answering when determining the economic system of a country?
What to produce?
What kind of government do the citizens want?
How to produce it?
For whom to produce?
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51 mark
The economic question of 'How should goods/services be produced in an economy?' refers to:
Whether production should be capital intensive or labour intensive
Whether the economy should be in the tertiary sector
Whether raw materials should be imported
Whether the goods should be produced for wealthy households
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11 mark
The price mechanism functions as a signalling tool in a market economy by:
Directly allocating resources based on government regulations
Reflecting consumers' preferences and scarcity of goods
Eliminating competition among producers to maintain stability
Controlling prices to ensure equal access to goods for everyone
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21 mark
How does the price mechanism contribute to the efficient allocation of resources?
By ensuring that resources are allocated based on political priorities
By reducing competition among producers
By discouraging consumer spending on non-essential goods
By directing resources to where they are most in demand
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31 mark
In a competitive market, what is the role of the price mechanism in allocating resources?
It allocates resources based on the government's resource allocation plan
It allocates resources according to the preferences of producers
It allocates resources to those who have the greatest ability to pay
It allocates resources to the most efficient producers based on consumer demand
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41 mark
In a competitive market, what is the role of prices in resource allocation?
To ensure equal distribution of resources
To control supply and maintain equilibrium
To signal both scarcity and demand
To allow producers to maximise profits
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51 mark
Which of the following statements is most true
Market disequilibrium occurs when:
Demand is equal to supply
Demand is greater than supply
Supply is greater than demand
Demand is greater than supply or supply is greater than demand
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