A market system works very well in solving some basic problems of the economy but it fails in some cases. Provide examples
The market deals with efficiency in production through the profit motive, which discourages firms from using inputs wastefully. It also guides firms' output decisions, matching quantities produced to consumer preferences. A price system distributes goods among consumers in accord with their tastes and preferences, using voluntary exchange to determine who gets what.
Free markets will not achieve all of society's goals. For example, they often have trouble keeping unemployment low. In fact, the unfettered operations of markets may even run counter to some goals, such as protection of the environment. Many observers also believe that markets do not necessarily distribute income in accord with ethical or moral norms.
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In the long run a perfectly competitive firm operates ____ and a monopolistically competitive firm operates ____
a. at the efficient scale; with excess capacity b. at the efficient scale; at the efficient scale c. with excess capacity; with excess capacity d. with excess capacity; at the efficient scale
If orange juice prices double next year, there will be a
a. rightward shift in the demand for grapefruit juice. b. rightward shift in the supply of grapefruit juice. c. leftward shift in the supply of grapefruit juice. d. leftward shift in the demand for grapefruit juice.