Which of the following represents key strengths of the market economy as a system of allocation?
A)Goods and services are allocated based on willingness and ability to pay,rather than based on need.
B)Producers have strong incentives to innovate because successful innovators are rewarded with higher profit.
C)Since price is freely set based on supply and demand,shortages and surpluses are minimized.
D)Both b.and c.above are correct.

Question

Quizplus · Accepted Answer

B is correct because in a market economy, producers are motivated to innovate because they can earn higher profits by meeting consumer demand with new and improved products. C is correct because in a market economy, prices are determined by supply and demand, and shortages and surpluses are minimized because when prices are too high, demand falls, and when prices are too low, supply falls. A is not a strength of a market economy because it can result in goods and services being allocated based on the ability to pay, which can lead to unequal distribution of resources.

Which of the Following Represents Key Strengths of the Market