The efficiency of competitive markets happens because
A) the Australian economy uses a command system to allocate resources within the competitive markets.
B) prices adjust to make buying plans and selling plans compatible.
C) governments organise and monitor production.
D) people make environmentally aware purchasing decisions.
E) of the benevolence of the butcher, the brewer and the baker.

Question

Quizplus · Accepted Answer

In competitive markets, prices are determined by the forces of supply and demand. Producers and consumers adjust their behavior based on the prevailing market price, with the goal of maximizing their own self-interest. As a result, buying plans and selling plans become compatible, meaning that goods and services are produced and consumed at the most efficient level possible. This is the fundamental mechanism of how competitive markets operate, and why they are generally regarded as being efficient. None of the other choices accurately describe the way in which competitive markets function.

The Efficiency of Competitive Markets Happens Because