What role does the government play in a mixed economy?

What role does the government play in a mixed economy?

• A. It restricts all market activities
• B. It completely owns all production resources
• C. It intervenes to correct market failures
• D. It solely focuses on regulating international businesses

Answer: (C)

In a mixed economy, the government's role is primarily to intervene in the market to correct market failures. Market failures occur when the allocation of goods and services by a free market is not efficient, leading to negative outcomes for society. These failures can manifest in various forms, such as monopolies, public goods, externalities, and information asymmetry. By stepping in, the government can implement policies that promote competition, provide public goods that the market might underprovide, regulate externalities to mitigate their effects, and ensure that consumers have access to accurate information. This intervention is essential for maintaining a balance between the private sector's efficiency and the public sector's welfare objectives. The other options do not accurately represent the government's role in a mixed economy. Restricting all market activities would inhibit economic growth and innovation, while complete ownership of all production resources aligns more with a command economy rather than a mixed one. Focusing solely on regulating international businesses would ignore the broader responsibilities of the government in managing domestic economic issues as well.

In a mixed economy, the government's role is primarily to intervene in the market to correct market failures. Market failures occur when the allocation of goods and services by a free market is not efficient, leading to negative outcomes for society. These failures can manifest in various forms, such as monopolies, public goods, externalities, and information asymmetry.

By stepping in, the government can implement policies that promote competition, provide public goods that the market might underprovide, regulate externalities to mitigate their effects, and ensure that consumers have access to accurate information. This intervention is essential for maintaining a balance between the private sector's efficiency and the public sector's welfare objectives.

The other options do not accurately represent the government's role in a mixed economy. Restricting all market activities would inhibit economic growth and innovation, while complete ownership of all production resources aligns more with a command economy rather than a mixed one. Focusing solely on regulating international businesses would ignore the broader responsibilities of the government in managing domestic economic issues as well.