Competition, Profit Motive, and Consumer Sovereignty

Question:

Competition, profit motive, and consumer sovereignty are most common in which type of economic system?

A) Command Economy

B) Traditional Economy

C) Market Economy

D) Mixed Economy

Answer: C) Market Economy

Explanation:

In a Market Economy, the following characteristics are predominant:

Competition: In a market economy, businesses and individuals compete freely. This competition drives innovation, efficiency, and better quality goods and services.

Profit Motive: The profit motive is a fundamental aspect of a market economy. Individuals and businesses are motivated by the potential for profit, which influences their decisions and drives economic activity.

Consumer Sovereignty: In a market economy, consumer preferences and choices dictate what goods and services are produced. Consumers have the power to influence the market through their purchasing decisions.

Why the Other Options Are Less Accurate:

A) Command Economy: In a command economy, the government controls all major aspects of the economy, including production and pricing, leaving little room for competition or consumer sovereignty.

B) Traditional Economy: Traditional economies rely on customs and traditions to guide economic decisions, with limited emphasis on competition, profit motives, or consumer choice.

D) Mixed Economy: While a mixed economy combines elements of market and command economies, it may not emphasize competition, profit motive, and consumer sovereignty as strongly as a pure market economy.

Competition, profit motive, and consumer sovereignty are most commonly found in a Market Economy. This system emphasizes the role of individual choices and market forces in shaping economic outcomes.