The main mechanism that regulates the market system is
Multiple Choice
A self-interest.
B private property.
C competition.
D freedom of enterprise and choice.
The correct answer and explanation is:
Correct Answer: C) competition
The main mechanism that regulates the market system is competition. In a market economy, various individuals and businesses operate freely, guided by their own goals and interests. However, it is competition among these participants that ensures the system functions efficiently and fairly.
Competition acts as a regulatory force by influencing prices, quality, innovation, and the allocation of resources. When multiple producers compete to sell similar goods or services, they are compelled to offer better quality at lower prices to attract consumers. This benefits consumers by giving them more choices and better value. It also encourages producers to innovate and improve efficiency in order to stay ahead of rivals.
Without competition, monopolies can form, leading to high prices, limited choices, and reduced incentives to improve products or services. For example, in a market with only one seller, that seller can set prices without concern for losing customers. But with several sellers, each must work to offer attractive terms, keeping prices in check and encouraging better service.
Additionally, competition ensures that resources are used where they are most valued. Businesses that fail to produce efficiently or offer goods that people want will not survive in a competitive market. This automatic filtering process helps the economy direct resources to the most productive and innovative uses.
Although other elements such as self-interest, private property, and freedom of enterprise and choice are important characteristics of a market system, they do not by themselves regulate it. Competition is the active mechanism that balances these elements and prevents abuse or inefficiency. It plays a critical role in maintaining the health and fairness of a market economy.