Which statement best describes a pure market economy?

Which statement best describes a pure market economy?

A) Producer intervention in economic choices is strictly forbidden.

B) The government determines economic choices and makes most decisions.

C) The decisions made by producers and consumers drive all economic choices.

D) Producers and consumers make some economic choices while the government makes others.

Answer: C) The decisions made by producers and consumers drive all economic choices.

Another name for a pure market economy is a free-market economy and in this type of economic system, all economic choices are formed based on decisions that are made by the producers and consumers as far as the utilization of resources and production and distribution of goods and services are concerned. There is minimal involvement of the government and other economic factors like supply and demand and participants’ self-interested drive for the allocation of economic resources in the economy. The producers and the consumers are independent and make the economic choices as per their own will and preferences, available resources and the signals that are received from the market. The role that the government has is thus insignificant and this therefore gives room for competition, profit motives and consumer sovereignty to reign the economy without interference with the central planning.