Text 1: Economist Dr. Sarah Hill defends market pricing. "Prices convey information about scarcity and value," Hill writes. "Markets efficiently allocate resources by signaling where production should increase or decrease."
Text 2: Ecological economist Dr. David Chen notes market failures. "Prices ignore externalities—pollution, ecosystem degradation—because markets don't charge for them," Chen observes. "Efficient allocation within markets misses costs borne by others."
How does Chen's observation complicate Hill's market efficiency claim?
By showing prices don't exist
By identifying costs that market prices systematically exclude
By arguing allocation is never efficient
By claiming scarcity has no relationship to price
Correct Answer: B
Choice B is the correct answer. Hill's efficiency claim assumes prices capture relevant information. Chen shows prices miss externalities—systematic exclusion that distorts the efficiency claim.
- Evidence: Chen: markets "don't charge for" externalities.
- Reasoning: Missing information makes allocations inefficient in broader terms.
- Conclusion: Excluded costs challenge Hill's efficiency picture.
Choice A is incorrect because Chen discusses prices. Choice C is incorrect because Chen identifies specific failures. Choice D is incorrect because scarcity-price link isn't disputed.