Which of the following statements best describes a mixed economy?

Question:- Which of the following statements best describes a mixed economy?

a.      In a mixed economy, the role of individual selfinterest is relatively unimportant because government makes most of the economic decisions.

b.      In a mixed economy, society determines production and the allocation of goods and services only through the market system.

c.      In a mixed economy, government policies determine the production and the allocation of goods and services, but each individual is free to pursue his or her own self-interest.

d.      In a mixed economy, the government and private sectors interact in determining production and allocation of goods and services.

Answer:- The correct option is d. In a mixed economy, the government and private sectors interact in determining production and allocation of goods and services.

A mixed economy is a combination of market and command economies. In a mixed economy, there are two parties that make economic decisions – private sector businesses and government. For most goods and services, production capacities and pricing are influenced by the market forces of supply-demand. It enables individual producers and consumers to seek their own interests. However, the government controlled economy through regulations regulation subsidies taxes and social programs.

Public goods and services such as infrastructure, healthcare, education and national defense may be provided by the government. The government also controls private businesses in the sector with laws touching on employment, environmental protection and consumer protections among others. Government programs and policies are funded through taxes. The government may also try to guide the economy through fiscal and monetary policies. The private sector manages majority of economic activity; however, the government also plays a major part in it. This balance between freedom in the market and intervention from government is aimed to enable prosperous circumstances while managing failure of markets as well as economic inequality. Mixed economy is characterized by the combination of free enterprising and centralized planning.