The price system functions most effectively when
A) supply equals demand.
B) there is no divergence between private costs and social costs.
C) prices equal output.
D) external diseconomies equal external economies.
E) there is a complete absence of direct regulation.

Question

Quizplus · Accepted Answer

The price system functions most effectively when there is no divergence between private costs and social costs, as this ensures that market prices reflect the true cost of production and consumption, leading to efficient resource allocation.

The Price System Functions Most Effectively When