When decision makers are not faced with full costs or benefits of their actions, the result is the market system
A)will generate sufficient allocation of goods or services for society.
B)generates an inefficient allocation of goods or services.
C)generates sufficient quantities of goods and services for consumers.
D)generates an efficient allocation of goods and services.

Question

Quizplus · Accepted Answer

When decision makers are not faced with full costs or benefits of their actions, they tend to make choices based on incomplete information, resulting in an inefficient allocation of goods and services in the market system. The market system assumes that all costs and benefits are taken into account by decision-makers, but this is not always the case. As a result, the market system may fail to allocate resources efficiently if there are externalities or other market failures that prevent decision-makers from bearing the full costs or reaping the full benefits of their actions.

When Decision Makers Are Not Faced with Full Costs or Benefits