Asked by J’Myaa Tameriaa on Jun 22, 2024
Verified
The fact that individuals in a market economy act so as to make themselves better off is a major reason a market equilibrium is usually efficient.
Market Economy
An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with little government intervention.
Market Equilibrium
A situation in which market supply equals market demand, so there is no incentive for price changes unless external conditions change.
- Acquire knowledge on the fundamentals of market equilibrium and the prerequisites for reaching efficiency.
- Comprehend the essential role that incentives play in molding economic behaviors and their consequences.
Verified Answer
MB
Madison BarrieJun 26, 2024
Final Answer :
True
Explanation :
In a market economy, self-interested behavior leads individuals to pursue actions that maximize their own well-being. This behavior, in turn, leads to market outcomes that are efficient in the sense that they maximize the total benefits to society. This is because individuals who behave in their own best interests will naturally gravitate towards activities that are the most productive and valuable, since these activities offer the highest returns. As a result, resources are allocated in a way that maximizes overall social welfare, leading to an efficient market equilibrium.
Learning Objectives
- Acquire knowledge on the fundamentals of market equilibrium and the prerequisites for reaching efficiency.
- Comprehend the essential role that incentives play in molding economic behaviors and their consequences.
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