The market is effectively able to allocate goods to their highest-valued uses because:
A) consumers will only purchase the good if its value is greater than its price.
B) government intervention keeps prices consistent with their market value.
C) suppliers will only produce goods for which the cost of production is less than the price.
D) consumers have a great incentive to conserve goods for future use.

Question

Quizplus · Accepted Answer

Consumers will only purchase goods if they believe the value they derive from the good is greater than the price they pay. This creates a market mechanism where goods are allocated based on their perceived value by individuals. This mechanism is known as the invisible hand, which is a term coined by Adam Smith to describe how market competition and self-interest work together to allocate resources in a society.

The Market Is Effectively Able to Allocate Goods to Their