Which of the following economic systems leaves production decisionscompletely up to the producers?O A. Command economyO B. Planned economyооооC. Mixed economyO D. Free-market economy
Answered on
D. Free-market economy
In a free-market economy, production decisions are primarily left up to the producers and consumers. This system is characterized by a lack of government intervention in the economic decision-making process. Companies produce goods and services based on consumer demand, and consumers are free to choose what they want to buy. Prices are determined by the laws of supply and demand: as the demand for a product increases and supply remains stable, the price tends to rise, and vice versa. In a pure free-market economy, all resources are owned by individuals, and the government's role is limited to enforcing property rights and contracts.
Extra: When discussing different economic systems, it's important to understand the spectrum on which they exist.
1. Command Economy: In a command economy, the government has total control over the production and distribution of goods and services. The state decides what to produce, how much to produce, and at what price to sell. An example of a country with a command or planned economy was the Soviet Union.
2. Planned Economy: This term is often used interchangeably with a command economy, indicating an economy where the government organizes production and allocates resources according to a plan, instead of relying on the free market.
3. Mixed Economy: A mixed economy features a blend of free-market principles with some government intervention. Most modern economies are mixed economies. Governments regulate or control certain economic activities while leaving others to market forces. They may provide public services, social security, or enforce regulations to protect the public and maintain fair markets.
4. Free-Market Economy: As mentioned above, in a free-market economy, the decisions of what, how, and for whom to produce are determined by the marketplace. The role of government is minimized. Producers are free to enter or exit markets based on potential for profit. The United States, while not having a completely free market, leans toward free-market principles, with regulations in place to correct market failures and protect the public interest.