Which of the four main advantages of price in a free market economy would best represent the statement, “prices can be easily increased to solve a problem of excess demand”? price as an incentive price system is “free” prices as signals flexibility

The correct answer here is D: Flexibility

Explanation:

The free-market economy is a system which allows for several advantages, unlike other systems. One of them is the availability of products on the market for consumers to acquire. Also, it allows for people to innovate and create products that respond to the needs of consumers and at the same time to make a profit for their creations, without having anyone control what you produce, and how much you make from it. It all depends on the demand from consumers. The pricing system is a medium through which products acquire their value depending on the supply and demand available and also the existence of competition. As a product is brought out initially, its price will be high as it has no further competition and it may be unique. However, as more products become available, and competition rises, prices will start changing, and the ones who offer good quality at better prices will flourish while the others may fail. This shows the capacity for flexibility given by the pricing system.

i dont know this man

marginal cost is a microeconomic measure that us to evaluate the extent to which the level of production of a good is sustainable in accounting, that is, to how many quantities the company plans to profit from the production of the good.

the concept of marginal cost is simple, it means the cost of producing one more item. for example, in the case of pies, the marginal cost is the cost of producing one more pie than those that have already been produced.

it is important to understand that productive activity influences marginal cost. the marginal cost of some goods can be very high, while others may be insignificant. for example, the marginal cost of producing an extra plane is very high. already the marginal cost of a water company to provide 1l more water is derisory.

in the case of pies, the cost involves the inputs, the labor and the fixed cost, which involves the fixed space of the bakery. the level of production initially has the marginal cost decreasing because there is space and manpower available. however, to produce more you have to hire more workers and buy more inputs. if physical space is limited, workers will conflict with places, inputs and their productivity will decrease, meaning there is an optimum point of production for each level of space and manpower. from this point on, the productivity of the workers will be getting smaller because of lack of space, so that the marginal cost of producing one more pie will be increasing. so, although you have not posted the chart, but if you have the answer, you can see that my explanation goes according to the marginal cost curve that will increase from the 4th pie, answer (c).