Question

Which of the following is a characteristic of Market Economy?

• A. Social Welfare
• B. Collective Ownership of the Means of Production
• C. Profit motive
• D. Centralized Planning

Answer 1

Answer:

C. Profit motive

• A Market Economy (often called Capitalism) is an economic system where decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand. In this system, the primary incentive for individuals and businesses to produce goods and services is the desire to earn a profit.

• Social Welfare: While market economies can lead to wealth, the primary driver is individual gain. Social welfare is the central focus of a Planned or Socialist Economy.

• Collective Ownership: This is a hallmark of Communism or Socialism, where the "means of production" (factories, land) are owned by the community or the state.

• Centralized Planning: In a market economy, there is no "master plan" from the government. Instead, millions of individual consumers and producers make their own choices. Central planning is the defining feature of a Command Economy (like the former Soviet Union).