Markets tend to be efficient because
A) people respond to incentives.
B) Adam Smith created markets.
C) entrepreneurs always try to produce at the lowest possible cost.
D) decisions are always made at the margin.

Question

Quizplus · Accepted Answer

Markets tend to be efficient because people respond to incentives. When there is a demand for a particular product or service, entrepreneurs respond by providing that product or service, which leads to efficient allocation of resources. Additionally, when prices of goods and services increase, consumers are incentivized to consume less and producers are incentivized to produce more, leading to a balance between supply and demand.

Markets Tend to Be Efficient Because