Question

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative: Assertion (A): When the allocative function is performed well, scarce resources are allocated to the most productive firms.
Reason (R): Allocative function directs funds into their most productive investment opportunity.

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation.
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation.
• C. Assertion (A) is true, Reason (R) is false.
• D. Assertion (A) is false, Reason (R) is true.

Hint:

Allocative function ensures optimal use of limited resources for maximum economic efficiency.

Answer 1

The Correct Option is A

Both statements are true and related: the allocative function ensures that funds are directed to their most efficient use, meaning they go to firms where productivity and returns are high. Hence, Reason (R) is a correct explanation for Assertion (A).
Final Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation.