Question

Imagine you are a consultant who has been asked to summarize the strengths and weaknesses of Agoria, a nation with a pure market economy.Which of the following would you include in your report as weaknesses of Agoria's economy? Check all that apply.Occupational choices can be restricted.The economy experiences economic fluctuations, which are alternating periods of expansions and recessions in their level of economic activity, especially in employment and production.Because government is responsible for all production, the variety of products tends to be limited.People with no resources to sell could starve (income is distributed unequally).

Answer 1

Answer:

Two weaknesses as consultant can be identify: The economy experiences economic fluctuations, and people with no resources to sell could starve

Explanation:

In a pure market economy, the allocation of resources is based on purely the dynamics between supply and demand. If our economy is closed (there is no imports nor exports) and there is not different actors (such as government) and all trade goods are perfect (they are not public or semi-public goods), then the market will efficiently allocate all the resources. Nevertheless, this is not the case, and with an open economy and the existence of imperfections, any external impact will cause economic fluctuations, and those workers with no demandable offer will not be hired, and potentially will be out of the market.