Which of the following is a characteristic of a market economy?

A market economy is characterized by decentralized decision-making and resource allocation that is primarily driven by supply and demand. In such an economy, individuals and businesses make their own economic choices, and resources are allocated based on voluntary exchanges in the marketplace. Prices are determined by the interaction of consumers and producers, which reflects the preferences and demands of society as a whole.

The decentralized nature allows for a dynamic and responsive economy where production and consumption can adjust to changes in consumer preferences, resource availability, and innovative practices. This flexibility is a key advantage of market economies, as it encourages competition and innovation, leading to better products and services for consumers.

In contrast, centralized decision-making and government control over all prices suggest a command economy, where the government exerts significant influence over economic activities, which is not characteristic of a market economy. Additionally, limited competition would hinder the efficiency and responsiveness of the market, which thrives on competition to foster improvement and variety in goods and services.