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JAMB Economics 2001 Question 2

Question 2

Economic Systems

In a free market economy, the price system allocates resources

  1. A.under government's directives
  2. B.to ensure general welfare
  3. C.to their best alternative uses
  4. D.to reduce poverty
Show the answer and explanation

Answer: C (to their best alternative uses)

Explanation

In a free market, prices guide resources to the uses where they earn the most, that is, their best alternative uses.