A friend of yours asks you why market prices are better than government-determined prices. What do you say?
A) Because they generally reflect the value of a good to society, but not the cost of making it.
B) Because they generally reflect the cost to society of making a good, but not its value.
C) Because they generally reflect both the value of a good to society and the cost of making it.
D) Because they generally reflect neither the value of a good to society nor the cost of making it.

Question

Quizplus · Accepted Answer

Market prices are determined by the forces of supply and demand, which take into account both the value of a good to society (as reflected in demand) and the cost of making it (as reflected in supply). In contrast, government-determined prices may be based on factors other than supply and demand, such as political considerations or attempts to control inflation. Therefore, market prices tend to be more efficient and accurate in reflecting the true value and cost of goods.

A Friend of Yours Asks You Why Market Prices Are