Which of the following can help offset the power of interest groups in the economy?

• A. A well-functioning competitive market
• B. Government subsidies to specific industries
• C. Monopolistic control over resources
• D. Restricting entry of new firms

Answer: (A)

Verified step by step guidance

1. Understand the role of interest groups: Interest groups try to influence economic and political decisions to benefit their members, often by gaining special advantages or protections.
2. Analyze how a well-functioning competitive market works: In such markets, many firms compete freely, prices are determined by supply and demand, and no single group can easily dominate or manipulate the market.
3. Consider the effects of government subsidies to specific industries: Subsidies can strengthen interest groups by giving them financial advantages, which may increase their power rather than offset it.
4. Evaluate monopolistic control over resources: Monopolies concentrate market power in the hands of a few, which can enhance the influence of interest groups controlling those resources.
5. Assess the impact of restricting entry of new firms: Barriers to entry reduce competition, allowing existing interest groups to maintain or increase their power by limiting challengers.