The Economy of the US — Unit test

Question 7 • EA Academy Civics 9

Which scenario shows how a market economy is motivated by self-interest?

Answer

For years, Tire Company X was the only place to buy tires for 100 miles in any direction. The lack of competition meant that the company could charge higher prices for its tires. However, a new tire company has recently opened in the area. Competition has driven down prices.

Consumers have filed many complaints against Company A for failing to deliver products purchased from their online store. Based on the complaints, the state government has charged the company with violating the state’s consumer-protection laws.

It is the end of summer and Clothing Company Z has a surplus of summer clothes. Maite Ruiz, the store’s owner, decides to hold a sale on summer clothes. If customers buy three items of clothing, they will get 20 percent off the price. If they buy six items, they will get 40 percent off the price.

Over the last 10 years, Company B has purchased several companies that provide the same goods and services. It is now trying to buy its last large competitor. The government is trying to block the purchase, claiming that Company B already controls too much of its market.

Explanation

A market economy is motivated by self-interest when people or businesses make choices to benefit themselves. In C, Maite Ruiz offers discounts to sell surplus summer clothes, which can help her store earn revenue and clear its inventory. The other scenarios mainly describe competition or government action rather than a business’s effort to benefit itself.

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