IN A FREE MARKET ECONOMY, THE RATIONING OF SCARCE GOODS IS DONE PRINCIPALLY BY

• A. the government
• B. business organizations
• C. the price mechanism ✓
• D. consumers

The answer to the question is: C. the price mechanism

In a free market economy, the rationing of scarce goods is principally done by the price mechanism. This means that the allocation of scarce resources and goods is determined by the interaction of supply and demand in the market, leading to the establishment of equilibrium prices. The price mechanism allows for the efficient allocation of resources, as it signals to producers and consumers where resources are most needed and valued. When a good becomes scarce, its price rises, which in turn reduces demand and encourages producers to increase supply, ultimately leading to a new equilibrium.