CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment
A country's economy has a large private sector and a government that owns only defence and railway services, while most other goods are produced by private firms guided by market prices. Which type of economic system best describes this?
This is a mixed economy, because the government owns and runs certain sectors such as defence and railways while private firms operate most other industries through market prices. Pure capitalism lacks state ownership, socialism has predominant state ownership, and a traditional economy is based on custom.
- APure capitalist economy
- BSocialist economy
- CMixed economyCorrect
- DTraditional economy
Explanation
Both public and private sectors coexist, with the government running some key sectors and markets guiding the rest. This is a mixed economy. A pure capitalist system would have no significant state ownership, and a socialist system would have state ownership of most resources.
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