Which of the following is true of a pure market economy?

Question

BlackTom AI · Accepted Answer

Question restatement: The prompt asks which statement is true about a pure market economy, and provides four options to evaluate.
Option 1: 'All factors of production are owned by the government.' This describes a command or planned economy, not a pure market economy. In a pure market system, most resources are owned privately and allocated through markets, not by the state.
Option 2: 'All factors of production are privately owned.' This aligns with the core characteristic of a pure (free) market economy: private property and private ownership of resources, with decisions driven by supply and demand in voluntary exchanges. This statement is the one that accurately reflects a pure market setup.
Option 3: 'It has elements of both a market economy and a command economy.' That describes a mixed economy, where government and market forces both influence production and prices. A pure market economy deliberately minimizes government involvement, so this option is incorrect for a pure form.
Option 4: 'Its policies are based on religious decree.' This is not a defining feature of market economies; policy basis in a market system is typically economic efficiency and voluntary exchange, not religious law. Therefore this option is incorrect.
Summary of reasoning: The false options (1, 3, and 4) mischaracterize the core nature of a pure market economy by introducing government ownership, mixed-economy elements, or non-economic policy bases. The true statement directly reflects the private ownership of factors of production fundamental to a pure market economy, which is captured in Option 2.

Which of the following is true of a pure market economy?Single choice

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