If the economy relies entirely on the market mechanism to answer the WHAT,HOW,and FOR WHOM questions,it tends to

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Quizplus · Accepted Answer

The market mechanism is concerned only with profits and does not take into account external benefits or costs. Therefore, goods that yield external benefits (such as education, healthcare, and environmental conservation) will be underproduced because their benefits are not reflected in market prices, while goods that generate external costs (such as pollution and congestion) will be overproduced because their costs are also not reflected in prices. This is known as market failure.

If the Economy Relies Entirely on the Market Mechanism to Answer