Characteristics of a Market Economy Quiz

In a market economy, most economic decisions are determined by the interactions of individuals and businesses within the marketplace.

• True

• False

Limited government intervention is a characteristic of a market economy, where the government primarily enforces laws and protects property rights.

• True

• False

Prices of goods and services in a market economy are primarily determined by the forces of supply and demand.

• True

• False

Consumer choice is restricted in a market economy, as producers decide what products to offer based on their preferences.

• True

• False

The profit motive in a market economy serves as an incentive for individuals and businesses to engage in entrepreneurship and innovation.

• True

• False

A pure market economy requires no government involvement and operates completely independently.

• True

• False

While competition in a market economy encourages efficiency, it may also lead to unethical practices and exploitation of consumers.

• True

• False

Market economies might struggle to address public goods such as national defense and environmental protection due to their focus on profit.

• True

• False

Income inequality is an inherent consequence of a market economy, and no measures can be taken to mitigate it effectively.

• True

• False

Market economies can experience boom-and-bust cycles due to their reliance on consumer spending and investor sentiment.

• True

• False