A benefit of free markets is that they:

• A. eliminate all forms of income inequality
• B. guarantee equal access to goods and services for everyone
• C. allocate resources efficiently through the price mechanism
• D. require extensive government intervention to function

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a free market. A free market is an economic system where prices for goods and services are determined by open competition between privately owned businesses, with minimal government intervention.
2. Step 2: Recognize the role of the price mechanism in a free market. The price mechanism refers to how prices adjust based on supply and demand, guiding resources to their most valued uses without central planning.
3. Step 3: Analyze the options given. Free markets do not eliminate income inequality, as income distribution depends on various factors beyond market transactions.
4. Step 4: Consider access to goods and services. Free markets do not guarantee equal access for everyone because purchasing power varies among individuals.
5. Step 5: Conclude that the primary benefit of free markets is their ability to allocate resources efficiently through the price mechanism, which balances supply and demand and encourages productive use of resources.