Question

According to economists?

( )centrally planned socialism and pure market capitalism are equally capable of promoting social interest, but a mixed economy is an undesirable compromise between the two that will harm social interest.

( )market capitalism is the best system available and any government intervention and regulation will inevitably harm the social interest.

( )market capitalism is the best system available and some government intervention and regulation can either help or harm the social interest

( )centrally planned socialism is the best system available since governments generally make decisions that are in social interest.

Answer 1

Option (3).

Market capitalism relies on free market forces of demand and supply and is generally considered the best market model. But if market failures exist, the free market price and output may be different from socially optimal price and output, and government decides to intervene the market failure. However, this is beneficial for government correction for externalities. But if government intervenes by imposing price ceiling or price floor, there is a social inefficiency loss generated by such intervention which is harmful for the society.