In a competitive free market: Select one: A. there is no provision for the protection of property rights. B. all exchanges take place involuntarily. C. there is only one seller and many buyers. D. the government does not impose price controls.
The correct answer and explanation is:
The correct answer is D. the government does not impose price controls.
In a competitive free market, the defining characteristic is that it operates based on the forces of supply and demand without heavy government intervention. This means that prices are determined by the market participants (buyers and sellers), and the role of the government is minimal, usually limited to enforcing laws and regulations that ensure the market functions fairly, such as protecting property rights.
Here’s an explanation:
- Option A: There is no provision for the protection of property rights.
This is incorrect because protection of property rights is essential in any market, including a competitive free market. Without these rights, individuals would have no incentive to invest or trade, as there would be no legal guarantees of ownership. - Option B: All exchanges take place involuntarily.
This is incorrect because, in a competitive free market, all exchanges are voluntary. Buyers and sellers enter into transactions by mutual consent. A competitive market allows participants to freely choose whether to engage in a transaction or not. - Option C: There is only one seller and many buyers.
This describes a monopoly, not a competitive free market. A competitive market, on the other hand, involves many sellers competing with each other to offer goods and services at the best price. - Option D: The government does not impose price controls.
This is the correct description of a competitive free market. In such a market, prices are determined by supply and demand. The government may regulate certain aspects, like ensuring fair competition or protecting consumers, but it typically does not interfere by setting prices. If price controls were imposed, it would distort the natural balance of supply and demand, leading to inefficiencies like shortages or surpluses.
In summary, a competitive free market is characterized by minimal government interference, allowing market forces to govern prices and exchange freely.