The Market System Is Said to Be Efficient Because It

question 114

Multiple Choice

The market system is said to be efficient because it

• A) takes fewer resources to work than any other system.
• B) requires more labor than any other system.
• C) determines the price.
• D) allocates resources to who wants them.
• E) creates fewer goods and services than other systems.

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Definitions:

Economic Inefficiency

arises when resources are not allocated in a way that maximizes the potential output or when there is a failure to fully utilize resources, resulting in lost potential gains.

Limit Pricing

A competitive strategy where a firm sets the price of its product low enough to discourage new entrants from entering the market.

Technological Advance

The process of developing and implementing new technologies to improve products, services, or processes, driving economic growth and efficiency.

First-Mover Advantage

The competitive advantage gained by the initial significant occupant of a market segment, allowing for the establishment of strong brand recognition and customer loyalty before rivals enter the market.