Question

Which of the following statements is false? In a market economy, firms do not interact with consumers In both centrally planned and market economies, the three essential economic questions are what, how, and for whom. O In a market economy, decisions concerning the three essential questions result from interactions taking place in markets. O The two alternative approaches to the three essential questions are market economies and command economies. 0 In a centrally planned economy, decisions concerning the three essential questions are made by those who control the government.

Answer 1

There are 5 sub questions.Each one can be answer separately.

• The 1st statement is false.Because a market economy is an economic system in which the decisions regarding investment,production,and disrtributions are guided by the price signals created by the forces of supply and demand.The major characteristics of market economy is the existance of factor markets that play a dominant role in the allocation of capital and the factors of production.So in a market economy firms interact with consumers.
• The 2nd statement is true.Because the existance of scarcity creats te basic economic problem faced by every society,rich or poor.How make the best use of limited productive resources to satisfy human needs and wants.To solve this basic problem every centrally planned and market economies must answer the three basic questions.WHAT, HOW,and for WHOM.
• The 3rd statement is true.Because in the market economy the tree questions are that.What goods to be produced .How will goods and services produced.Who will consume the goods and services.These all points outs towards how should the goods and services be distributed among people.So in market economy decisions concerning the the three essential questions is taken by the interactions taken place in the market.
• The 4th statement is true.An economic system is the method used by a society to produce and distribute goods and services.COMMAND ECONOMIES; In a command economy governmental planning groups makes the basic economic decisions.MARKET ECONOMIES;in a market economy decisions are guided by the charges in prices that occur as individual buyers and sellers interact in the market place.
• The 5th statement is also true.Because unlike market economies a centrally planned economy is an economic system in which the state or government makes economic decisions rather than the being made by the interactions between consumers and producers.A centrally planned economy controls what is produced its distribution and use of resources.So in a centrally planned economy decisions about the 3 major questions are made by who controlling the government.

So only the 1 st statement is false.All other statements are true.