Resource Allocation and Economic Systems Practice Test

Based on how resources are allocated in the scenario, which outcome is most likely under the described allocation method? A city faces scarcity of ride-sharing trips on weekend nights. The city government sets a maximum fare below the previous market fare, limits the number of ride-share vehicles allowed to operate, and assigns drivers to neighborhoods based on a schedule (deciding what, how, and for whom via rules rather than prices).

A country faces a shortage of skilled electricians and copper wire, so it must decide WHAT to produce (new power lines versus other infrastructure), HOW to produce (which technologies and contractors), and FOR WHOM to produce (which neighborhoods get upgraded first). The government shifts the electricity sector from a state-run utility that sets uniform rates and assigns repair crews by central schedule to a system where multiple private firms compete, set prices, and can earn higher profits by restoring power faster. Based on how resources are allocated in the scenario, compared to the state-run approach, which incentive is stronger under the competitive private-firm approach?