Compared with other methods used to set prices, market pricing is relatively simple. Which of the following best describes market pricing?

• A. Prices are established through negotiations between buyers and sellers in black markets.
• B. Prices are determined by the interaction of supply and demand without government intervention.
• C. Prices are fixed by producers regardless of consumer demand.
• D. Prices are set by government-imposed price ceilings and floors.

Answer: (B)

Verified step by step guidance

1. Understand that market pricing refers to the process where prices are set based on the natural interaction of supply and demand in a competitive market.
2. Recall that in market pricing, no external authority like the government fixes or controls prices; instead, prices adjust to balance the quantity supplied and quantity demanded.
3. Recognize that prices established through negotiations in black markets or fixed by producers do not represent typical market pricing mechanisms.
4. Identify that government-imposed price ceilings and floors are examples of price controls, which interfere with market pricing.
5. Conclude that the best description of market pricing is: prices are determined by the interaction of supply and demand without government intervention.