Pros and cons of the Free Market System

Cons

Pros

(2)

Encourages competition

and innovation

Prevents governments from

regulating dangerous

economic activities

Increases the variety of

available products

Creates large gaps between

the rich and poor

Which pair of statements best completes the table?

O

A. (1) Protects domestic industries; (2) Discourages foreign

investment

O

B. (1) Allows governments to establish tariffs; (2) Leads to economic

collectivization

C. (1) Promotes economic freedom; (2) Encourages risky economic

behaviors

O

D. (1) Reduces government economic interference; (2) Removes

incentives for productive work

Pros: Encourages competition and innovation; Increases the variety of available products;

Cons: Prevents governments from regulating dangerous economic activities; Creates large gaps between the rich and the poor;

C. Promotes economic freedom; Encourages risky economic behaviors;

Explanation:

The free-market economy type has gradually become the dominant economic type around the world. The spread of this economic type has been largely due to the globalization and the fall of the communism in many areas of the world.

The free-market economy type has its pros and cons, thus its supporters and critics.

As pros can be seen that it encourages competition, innovation, the variety of products increases significantly, there is economic freedom, and the products are of higher quality for lower prices. On the other hand, the cons are that there are large gaps in wealth, encourages risky economic behavior, and the governments are prevented from regulating dangerous economic activities. The last one is very concerning, as even though the courts are intervening and putting things under control, often it is after the damage has been done, which can be easily avoided if the governments regulated things in the first place.