Which of the following best describes the system of rationing in economics?

• A. A method of allocating scarce resources among competing uses
• B. A way for firms to maximize profits by increasing production
• C. A process by which governments set prices for all goods and services
• D. A system where resources are distributed equally regardless of demand

Answer: (A)

Verified step by step guidance

1. Understand the concept of rationing in economics: it refers to the method used to allocate scarce resources when there is not enough to satisfy all wants and needs.
2. Recognize that scarcity means resources are limited, so there must be a system to decide who gets what portion of these resources.
3. Evaluate each option by comparing it to the definition of rationing: it is not about maximizing profits or government price setting, but about allocation.
4. Identify that rationing involves distributing resources among competing uses, which means deciding how to allocate limited resources efficiently.
5. Conclude that the best description of rationing is 'A method of allocating scarce resources among competing uses' because it captures the essence of how economics deals with scarcity.