The essential coordinating mechanism of a free-market economy is
A)allocative efficiency.
B)productive efficiency.
C)profit maximization.
D)the price system.
E)opportunity cost.

Question

Quizplus · Accepted Answer

The price system, determined by the interaction of supply and demand, is the coordinating mechanism of a free-market economy. Prices signal producers what goods and services are in demand and how much they should produce, while simultaneously informing consumers about the cost of their consumption choices. This allows for decentralized decision-making and allocation of resources while promoting efficiency and innovation.

The Essential Coordinating Mechanism of a Free-Market Economy Is