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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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