Competition helps create a healthy society by:

• A. guaranteeing equal income for all individuals
• B. eliminating all market failures
• C. encouraging innovation and efficiency among firms
• D. preventing the need for government intervention

Answer: (C)

Verified step by step guidance

1. Understand the role of competition in microeconomics: Competition among firms drives them to improve their products and reduce costs to attract consumers.
2. Recognize that competition does not guarantee equal income for all individuals, as income distribution depends on various factors beyond market competition.
3. Acknowledge that competition cannot eliminate all market failures, such as externalities or public goods, which sometimes require government intervention.
4. Identify that competition encourages innovation and efficiency because firms strive to outperform rivals by developing new technologies and optimizing resource use.
5. Conclude that competition helps create a healthy society primarily by encouraging innovation and efficiency among firms, which benefits consumers and the economy overall.