Which of the following statements is true about a market economy?
A) With a large enough computer, central planners could guide production more efficiently than markets.
B) Market participants act as if guided by an invisible hand to produce outcomes that maximize social welfare.
C) The strength of a market system is that it tends to distribute resources evenly across consumers.
D) Taxes help prices communicate costs and benefits to producers and consumers.

Question

Quizplus · Accepted Answer

In a market economy, market participants act as if guided by an invisible hand to produce outcomes that maximize social welfare. This means that individuals and firms pursue their own self-interest, but their actions ultimately result in allocation of resources that benefits society as a whole. This is the primary strength of a market system. The other options are incorrect because central planning has been shown to be inefficient, market systems do not necessarily distribute resources evenly, and taxes can distort market outcomes rather than improve them.

Which of the Following Statements Is True About a Market