Asked by Michaela Trujillo on Jun 24, 2024
Verified
Which of the following statements does not apply to a market economy?
A) Firms decide whom to hire and what to produce.
B) The "invisible hand" usually maximizes the income of society as a whole.
C) Households decide which firms to work for and what to buy with their incomes.
D) Government policies are the primary forces that guide the decisions of firms and households.
Market Economy
An economic system where supply and demand from private enterprises and consumers dictate the production of goods and services.
Invisible Hand
A term coined by Adam Smith to describe the self-regulating nature of the marketplace where individuals pursuing their own interest inadvertently benefit society at large.
Government Policies
Measures and regulations implemented by a government to influence economic, social, or administrative outcomes in the country.
- Acknowledge the influence of state regulations on the functioning of market economies.
Verified Answer
MB
michael brianJun 25, 2024
Final Answer :
D
Explanation :
In a market economy, decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system. The statement in D does not apply because, in a market economy, government policies are not the primary forces guiding the decisions of firms and households; instead, these decisions are largely made by the firms and households themselves based on market conditions.
Learning Objectives
- Acknowledge the influence of state regulations on the functioning of market economies.