Multiple Choice
From a neoclassical view, which statement best distinguishes positive analysis from normative analysis in economics?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which of the following is NOT a characteristic of a market economy?
A
Prices determined by supply and demand
B
Centralized government planning of resource allocation
C
Private ownership of resources
D
Voluntary exchange between buyers and sellers
Verified step by step guidance1
Step 1: Understand the definition of a market economy. A market economy is an economic system where decisions about production, investment, and distribution are guided by the price signals created by supply and demand.
Step 2: Identify key characteristics of a market economy, which typically include: prices determined by supply and demand, private ownership of resources, and voluntary exchange between buyers and sellers.
Step 3: Recognize that centralized government planning of resource allocation is a feature of a command or planned economy, not a market economy.
Step 4: Compare each option given in the problem to the characteristics of a market economy to determine which one does not fit.
Step 5: Conclude that the option 'Centralized government planning of resource allocation' is NOT a characteristic of a market economy because it contradicts the decentralized decision-making process inherent in market economies.
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