The market solves the incentive problem when allocating resources because the:
A) consumers will pay for the good only if its price is greater than the value of use.
B) consumers will pay for the good only if its value of use is greater than the price.
C) suppliers will produce the good only if its cost is less than the value of use.
D) suppliers will produce the good only if its value of use is less than the cost.

Question

Quizplus · Accepted Answer

In a market system, consumers are willing to pay for a good or service only if they believe that the value they will receive from using it is greater than the price they must pay. This creates an incentive for suppliers to produce goods and services that meet the needs and wants of consumers and allocate resources efficiently. Therefore, option B correctly explains the role of the market in solving the incentive problem by ensuring that resources are allocated to produce goods that have a demand in the market.

The Market Solves the Incentive Problem When Allocating Resources Because