Question

Which of the following is NOT an advantage of a free market economy?

Answer 1

Equality is NOT an advantage of a free market economy.  

Further explanation

A free-market economy is an economic system where rule by the supply and demand with a little to no government involvement. Most of the resources, equipment, buildings, goods, and services in a free market economy own by individual and private business.

In the free market economy, goods and services that are not or less profitable will not be produced. This will increase the problem for some community. Large firms can still dominate certain markets, even where there is a competition. This situation will wider the income gap and social problems.

However, there are some advantages of a free-market economy as follows:

1. Ensure a competitive market  

Supply and demand create competition atmosphere, which helps ensure that consumers get the best goods or services at a lower price. This competition also stimulates economic growth.

2. Optimum allocation of resources

Supply and demand determine what and how much goods and services to produce, so resources are better distributed and allocated. It also encourages firms to be more efficient as they seek to produce at the lowest price possible to maximize their profit.

3. Wider variety of goods and services/freedom  of choice

Goods and services produce based on consumer demand not by government regulations.

4. Absence of bureaucracy  

The absence of bureaucracy also reduces the cost of doing business for everyone.

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Keywords: market economy, the advantage of a market economy, the disadvantage of a market economy. free economy market

Answer 2

The correct option is (C).

Equality is not an advantage of a free market economy.

Further Explanation:  

Free market economy:

The free market economy is a market economy where the economy is ruled by the market forces of demand and supply and with no government intervention.

Justification for the correct and incorrect option:

A.  

Efficiency: This option is incorrect.

Efficiency is an advantage of a free market because, in this market economy, the market is ruled by the factors of market demand and supply. So the seller can grow efficiently. And maximum satisfaction is being gained by the consumers of the free market economy.

B.  

Growth: This option is incorrect.

Growth is one of the advantages of the free market economy because there is no government intervention or restriction. To gain profits, the firm focuses on product quality and maintains a standard for the product to survive in the competitive market.

C.  

Equality: This option is correct.

Equality is not an advantage of the free market economy because large firms can dominate over the resources or the market, and small scale industries will be suffering.

D.  

Freedom: This option is incorrect.

Freedom is the significant advantage of the free market economy because, in a free-market economy, there is no restriction in the entry or exit of the firms. The firms mainly focus on consumer preference and try to maintain their product quality to gain profits and to survive in a competitive market.

Therefore, equality is not an advantage of a free market economy.

Learn More:

1. Priced below current market price  

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2. Marketing mix  

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3. Competitive market

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Answer Details:

Grade: High school

Chapter: Free market economy

Subject: Economics

Keywords: Which of the following is not an advantage of a free market economy, efficiency, growth, equality, freedom; therefore, equality is not an advantage of a free market economy.