DECA+ Business Management and Administration Practice Exam

What does a market economy, also known as free enterprise, involve?

1. Government control of all economic activities

2. Individual and business control over production and distribution

3. Cooperative ownership models

4. Emphasis on subsistence farming

The correct answer is: Individual and business control over production and distribution

A market economy, also referred to as free enterprise, fundamentally revolves around the concept of individual and business control over the production and distribution of goods and services. In this system, decisions regarding what to produce, how to produce, and for whom to produce are primarily dictated by the supply and demand dynamics of the market, rather than being centrally planned or controlled by the government. This self-regulating nature of a market economy allows individuals and businesses the freedom to innovate and respond to consumer preferences, leading to a wide variety of products and services. The competition inherent in a market economy also drives efficiency and can promote economic growth, as businesses strive to meet consumer needs while maximizing their own profits. In contrast, economic systems characterized by government control, cooperative ownership models, or an emphasis on subsistence farming do not align with the core principles of a market economy. These alternatives typically involve varying degrees of regulation, collective management, or lack of emphasis on market-driven mechanisms, which all deviate from the free enterprise model.