VCE Economics Practice Questions - VCE Economics (Units 3 & 4) Exam

Which of the following best describes the role of relative prices in a competitive market economy?

They ensure that government price ceilings are set at equitable levels for all citizens. They maintain constant price ratios between goods regardless of supply or demand changes. They eliminate the need for financial incentives for private entrepreneurs. They signal changes in consumer preferences and relative profitability, guiding resource allocation.

Correct Answer:

They signal changes in consumer preferences and relative profitability, guiding resource allocation.

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