Prices usually allocate resources efficiently because they allocate resources to:

• A. the buyers who value them most highly and the sellers who can produce them at lowest cost
• B. the buyers and sellers who are randomly selected by the market
• C. the sellers who have the largest market share
• D. the buyers who have the highest incomes regardless of their preferences

Answer: (A)

Verified step by step guidance

1. Understand the role of prices in a market economy: Prices serve as signals that help allocate resources efficiently by reflecting both the value buyers place on goods and the cost to sellers of producing them.
2. Recognize that efficient allocation means resources go to those who value them most and are produced by those who can do so at the lowest cost, maximizing total surplus in the market.
3. Eliminate options that do not align with this principle, such as random selection, allocation based on market share, or income without regard to preferences, as these do not ensure efficiency.
4. Focus on the option that states prices allocate resources to buyers who value them most highly and sellers who can produce them at the lowest cost, as this matches the economic theory of efficient resource allocation.
5. Conclude that this option best explains why prices usually allocate resources efficiently in a market.