The role of price in a market-directed economy is to
A. determine the sale prices of clearance items in a retail store
B. serve as a rough measure of the value of resources used to produce goods and services
C. ensure no consumer pays prices that are too high
D. determine the amount of losses that can be sustained by a company
E. allocate profits to companies even though they may not be providing the most desirable goods and services
Answer: (B) Prices in a market-directed economic system vary to allocate resources and distribute income according to consumer preferences, so price is a rough measure of the value of resources used to produce goods and services. (B) is the correct answer. The remaining choices (A), (C), (D), and (E) relate to decisions that may be utilized in some pricing strategies and tactics but do not relate to the role of price at the macro-level of a market-directed economy, and are incorrect choices.