Micah D. answered • 10/30/22
Associate Professor of Economics
The answer, D, becomes clear when you concieve of markets as being in a perfectly competitive state. When you hear the term "free markets" this often refers to competitive markets. They are competitve when no single producer has market power. That is, no single producer can affect price. They are all price-takers in this idealized world. And, what's important to this answer, is realizing none of them can earn above-normal profits if things are free and competitive. They pay their bills, but can't earn excess profit.
Because of this, the only way a producer can make an above-normal profit would be to innovate. They can innovate to become more efficient and reduce their costs. Or they can innovate a new product and gain a temporary advantage in a new market. This is how "free markets" promote innovation, although "competitive markets" is a better term to use in this case. It's not private property that promotes innovation on its own, but the competition and desire for profits.
What should also be clear is that answer, C, is not the best answer because of the term "support." The market does not "support" any one firm or company. However, in a free, competitive market, they should all be treated equally, just not supported in any way.
