Question

Which of the following statements is correct regarding mixed economy?

• A. Both, the market and state, provide goods and services.
• B. The state owns the factors while the private sector handles the distribution.
• C. The market owns the factors, but the state regulates their usage.
• D. The government decides how goods are to be produced and distributed.

Answer 1

The correct option is A Both, the market and state, provide goods and services.

Option (a) is correct. In a mixed economy, the market will provide whatever goods and services it can produce well, and the government will provide essential goods and services which the market fails to provide.

Option (b) is incorrect.The economic system in option (b) is not practised. It borrows some of the features from both communism and capitalism.

Option (c) is incorrect. In a mixed economy, the market does not own all factors. The state may also own labour, land (e.g. railways), etc. Most economies are mixed economies, i.e., the government and the market together answer the three questions of what to produce, how to produce, and how to distribute what is produced.

Option (d) is incorrect. It is a socialist system where the government decides what goods are to be produced according to the needs of the society as it is believed that the government knows best what people need the most.