Question

Freedom of entry and exit of producers enables an economy to adjust to changes in which of the following areas?

A) Labor market
B) Government regulations
C) Supply and demand dynamics
D) Consumer preferences

Answer 1

The freedom of entry and exit of producers enables an economy to adjust to changes in supply and demand dynamics.

Step-by-step explanation:

The freedom of entry and exit of producers enables an economy to adjust to changes in supply and demand dynamics. In a market-oriented economy, when there is a change in consumer preferences, producers are able to enter or exit the market to meet the new demand.

For example, if consumers start preferring electric cars over gasoline cars, producers can adjust by increasing the production of electric cars and decreasing the production of gasoline cars.