The market mechanism
A) Is not a very efficient means of communicating consumer demand to the producers of goods and services.
B) Works through central planning by government.
C) Eliminates market failures created by government.
D) Works because prices serve as a means of communication between consumers and producers. Buyers choose how much to buy based on price; profitability and therefore production are driven by prices.

Question

Quizplus · Accepted Answer

The market mechanism works through the price system, where prices act as a means of communication between consumers and producers. Buyers choose how much to buy based on price, and producers respond by producing more or less based on profitability, which is determined by prices. This allows for efficient communication of consumer demand to producers and efficient allocation of resources.

The Market Mechanism