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Which statement is listed in the unit as a DEMERIT, rather than a merit, of a capitalist economy?
AWide economic inequality splitting society into haves and have-nots
BOptimum allocation of resources to their most productive uses
CSelf-regulation through the automatic working of price mechanism
DStrong incentives for innovation and technological progress
Answer & Solution
Correct answer: A. Wide economic inequality splitting society into haves and have-nots
1. The unit lists vast inequality and social injustice among capitalism's demerits.
2. Optimum allocation, self-regulation and innovation incentives are listed as merits.
3. Therefore the demerit is the economic inequality option.
4. The three remaining options are explicitly merits, so they cannot be the answer.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.4_
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