Praxis Middle School Social Studies (5089) Practice Test

The correct answer is the mixed economy, which is characterized by a blend of private enterprise and government regulation. In a mixed economy, both the private sector, where individuals or businesses own and operate resources, and the public sector, where the government manages certain resources and economic activities, play significant roles. This system allows for the benefits of free-market competition while also ensuring that the government can intervene to address market failures, protect the environment, and provide public goods.

By combining elements of capitalism and socialism, a mixed economy aims to achieve more equitable and stable economic outcomes. For instance, while businesses may compete in the marketplace, the government can impose regulations to ensure fair practices, protect consumers, and promote social welfare. This flexibility allows for a balance between individual freedom and social responsibility, showcasing the strengths of both private initiative and governmental oversight.

In contrast, a market economy primarily focuses on private ownership and minimal government intervention, whereas a command economy relies heavily on government control over resources and decision-making. A socialist economy might lean more toward collective ownership and governmental management without the same degree of private enterprise found in a mixed economy. Thus, the mixed economy stands out as the system that encapsulates both private enterprise and government regulation most effectively.