What is more likely to be found in a free market economy than in a planned economy ?
Correct answer: B. an incentive to innovate
- A. an even distribution of income
- B. an incentive to innovate
- C. a wide range of public goods
- D. full employment of labor
Explanation
Competition and the possibility of earning profit give firms in a free market an incentive to develop new products and production methods. Planned economies may pursue other goals, but innovation is not driven as directly by market rewards.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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