Which of the following statements about market economies is true?

Question

Quizplus · Accepted Answer

The statement about market economies that is true is that an important characteristic of the market system is its ability to set in motion forces that tend to correct disequilibrium. This means that if there is a shortage or surplus of a good or service, the market will adjust the price and quantity to eventually reach equilibrium. This self-correcting mechanism is a strength of market economies. The other choices are false or misleading. Market failure does not mean that a market economy is incapable of satisfying human wants, but rather that sometimes the market may not allocate resources efficiently. Most present-day economists do not advocate extensive government intervention in most parts of market economies, but rather support a mixed economy with some government intervention. Externalities can lead to market failures and inefficient outcomes, not socially efficient outcomes. Lastly, pure market economies do not necessarily provide the best social outcome.

Which of the Following Statements About Market Economies Is True