Which of the following is an advantage that a competitive market economy offers to producers?

• A. Producers can ignore consumer preferences without consequence.
• B. Producers face no competition from other firms.
• C. Producers are guaranteed profits by the government.
• D. Producers have the freedom to choose what goods to produce and set their own prices.

Answer: (D)

Verified step by step guidance

1. Understand the nature of a competitive market economy, where many producers and consumers interact freely without central control.
2. Recognize that in such a market, producers respond to consumer preferences because consumer demand influences what goods are profitable to produce.
3. Note that producers face competition from other firms, which prevents them from ignoring consumer preferences or setting prices arbitrarily.
4. Acknowledge that the government does not guarantee profits in a competitive market; profits depend on market conditions and efficiency.
5. Conclude that a key advantage for producers in a competitive market is the freedom to decide what goods to produce and to set prices based on market signals, allowing them to innovate and respond to consumer needs.