How has the free enterprise system contributed to technological innovation?

• A. By imposing strict government controls on research and development activities.
• B. By limiting market entry, which reduces the incentive for firms to innovate.
• C. By discouraging private investment in technology through high taxation.
• D. By encouraging competition, which motivates firms to develop new technologies to gain an advantage.

Answer: (D)

Verified step by step guidance

1. Understand the nature of the free enterprise system, which is characterized by minimal government intervention, private ownership, and competitive markets.
2. Recognize that in a free enterprise system, firms compete with each other to attract consumers and increase profits.
3. Analyze how competition creates incentives for firms to innovate technologically, as new technologies can provide a competitive advantage by improving products or reducing costs.
4. Contrast this with scenarios where government controls, market entry limitations, or high taxation might reduce incentives for innovation by restricting competition or reducing potential rewards.
5. Conclude that the free enterprise system contributes to technological innovation primarily by encouraging competition, which motivates firms to develop new technologies to gain an advantage.