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

Question

Quizplus · Accepted Answer

Market-determined prices are better because they generally reflect both the value of a good to society and the cost of making it. This is because in a free market, producers are incentivized to produce goods for which consumers are willing to pay the most, while also keeping the production costs low in order to compete with other producers. Therefore, the market price tends to strike a balance between the two, resulting in an efficient allocation of resources. In contrast, government-determined prices can be influenced by political agendas, subsidies, and price floors or ceilings, which can result in inefficiencies, surpluses or shortages, and distortions in the market.

A Friend of Yours Asks You Why Market Prices Are