In a competitive market economy, which of the following factors is directly affected by competition?

• A. The gravitational pull of the earth
• B. The laws of physics
• C. The allocation of resources
• D. The color of currency notes

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the context of a competitive market economy, where many buyers and sellers interact freely without any single participant controlling the market.
2. Step 2: Recognize that competition in such a market primarily influences economic variables related to supply, demand, prices, and how resources are distributed among different uses.
3. Step 3: Identify that factors like the gravitational pull of the earth and the laws of physics are natural constants and are not influenced by economic activities or competition.
4. Step 4: Note that the color of currency notes is determined by government or central bank policies and is unrelated to market competition.
5. Step 5: Conclude that the factor directly affected by competition in a competitive market economy is the allocation of resources, as competition drives efficient distribution based on consumer preferences and producer costs.