4

Set 4: Text Structure (Advanced)

Explanation

Answer: A

PASSAGE

In a market economy, prices act as signals. High prices signal scarcity, encouraging production. Low prices signal abundance, discouraging it. This decentralized coordination is the 'invisible hand' at work.

Which choice best describes the system described?

A. A self-regulating feedback loop driven by information flow.✓ Correct
B. A government-controlled distribution system.
C. A random chaotic process.
D. A system based on charity.

Detailed Explanation

Mechanism: Prices = Signals (Information). Process: Encourage/Discourage (Feedback). Result: Coordination (Self-regulating).

Key Evidence:

• "act as signals"

• "encouraging"

• "discouraging"

• "decentralized coordination"

Why others are wrong: B (Decentralized.), C (Coordinated.), D (Market, not charity.).

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