Economics 1301 Questions?

Question

Economics 1301 Questions

We are going to have a test soon and these are two questions on the review sheet i can not seem to come up with an answer.. Can someone please help me out and you will receive 11 points..

The essential feature of the market mechanism is the price signal? True or False

Adam Smith observed how govenment directives can lead to the best allocation of resources? True or False

Answer 1

The answer to the first question is true. If a market is free from government intervention, prices will send signals to producers and consumers. For example if prices are rising it will send a signal to producers to produce more as there appears to be a shortage or the opposite if prices are falling.

The answer to the second question is false. In the 'Wealth of Nations' Adam Smith proposed that free markets that operate without government intervention provide the most efficient allocation of resources.

Hope that helps.