Question on: JAMB Economics - 2024
Producers operating in a free market economy are more efficient as a result of
A
the existence of competition
B
government regulation of their activities
C
the very few number of participants
D
the commitment of the shareholders
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Correct Option: A
In a free market economy, the efficiency of producers is primarily driven by competition. Here's why:
- Competition: When multiple producers compete, they strive to offer better products or services at lower prices to attract consumers. This incentivizes them to:
- Reduce costs
- Improve quality
- Innovate
- Government regulation: Government regulation can sometimes stifle efficiency as it can lead to increased costs and decreased innovation.
- Few participants: A small number of participants can lead to a lack of competition and thus inefficiency.
- Shareholder commitment: While important, it's not the primary driver of efficiency. Competition is the key factor.
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