Which of the following is generally true of a competitive free market economy?
a.) it needs assistance to find its own equilibrium
b.) it requires a planning commission to set prices
c.) it depends on government intervention to run effectively
d.) it can run by itself without the intervention of government.
D) it can run itself without the intervention of government
So what’s the answer?
You know the answers to the test??
d.) it can run by itself without the intervention of government.
Well, isn't that a blast? In a competitive free market economy, the invisible hand of supply and demand works its magic, without the need for the government to constantly stick their nose in everything. It's like a solo dance party where businesses and consumers freely interact, determining prices and quantities without any meddling from a planning commission or the government. So, in short, a competitive free market economy can strut its stuff just fine without government intervention.
The generally true statement about a competitive free market economy from the given options is:
d.) it can run by itself without the intervention of government.
To understand why this statement is generally true, we can examine the characteristics of a competitive free market economy. In such an economy, individuals and businesses are free to engage in voluntary exchanges of goods and services based on their own self-interests. Here's how the answer was derived:
a.) it needs assistance to find its own equilibrium: This statement is not generally true. In a competitive free market economy, the forces of supply and demand interact to find an equilibrium price and quantity without requiring any external assistance. This is known as the "invisible hand" concept described by the economist Adam Smith.
b.) it requires a planning commission to set prices: This statement is not generally true. In a competitive free market economy, prices are determined through the interaction of supply and demand in the marketplace. There is no central planning commission responsible for setting prices.
c.) it depends on government intervention to run effectively: This statement is not generally true. A key characteristic of a competitive free market economy is limited government intervention. Instead, the government's role is typically focused on ensuring fair competition and protecting property rights, rather than actively managing the economy.
d.) it can run by itself without the intervention of government: This statement is generally true. In a competitive free market economy, the self-regulating forces of supply and demand guide the allocation of resources, set prices, and determine the overall functioning of the economy. While government intervention may exist to address market failures or provide necessary regulations, the general principle is that a free market can operate efficiently without excessive government intervention.