Government Intervention in Market Economies

Steps:

• Define a market economic system as one driven by supply, demand, and private decisions without central planning.
• Identify features: private ownership, competition, and externalities like pollution or monopolies can arise naturally.
• Spot government actions: minimum wages represent intervention to correct market failures or social issues.
• Eliminate options: A, B, D fit market dynamics; C involves state control.

Why C is correct:

• In a pure market economy, wages are set by supply and demand; government minimum wages violate laissez-faire principles by distorting free market allocation.

Why the others are wrong:

• A: Monopolies can emerge in markets due to barriers to entry, supplying specialist goods without regulation.
• B: Pollution is a negative externality from profit-driven firms, common in unregulated markets.
• D: Private firms can own and produce defense equipment, as markets allow ownership of production means.

Final answer: C