Enforcing property rights in an economy will:

• A. reduce the efficiency of resource allocation
• B. decrease the incentive for innovation
• C. lead to widespread market failures
• D. encourage investment and economic growth

Answer: (D)

Verified step by step guidance

1. Understand the role of property rights in microeconomics: Property rights define the legal ownership and control over resources and goods, which allows individuals and firms to use, transfer, or sell these resources.
2. Recognize that enforcing property rights provides security to owners, which encourages them to invest in and improve their resources because they expect to reap the benefits of their investments.
3. Analyze how secure property rights reduce uncertainty and transaction costs, leading to more efficient allocation of resources as owners can confidently engage in market exchanges.
4. Consider the impact on innovation: When property rights are protected, innovators have stronger incentives to develop new products or technologies since they can protect and profit from their inventions.
5. Conclude that enforcing property rights generally promotes investment, innovation, and economic growth, rather than reducing efficiency, decreasing incentives, or causing market failures.