Which term describes an economy in which the means of production are privately owned and operated for profit?

• A. Free enterprise system
• B. Mixed economy
• C. Command economy
• D. Barter

Answer: (A)

This question focuses on an economy built on private ownership and the pursuit of profit. In a free enterprise system, individuals and firms own the means of production—land, factories, and other resources—and operate businesses to earn profits. Market prices, driven by supply and demand, guide what gets produced and in what quantities. Competition among firms pushes efficiency and innovation, while consumer choices shape which products and services thrive. The government’s role is typically limited, allowing private decisions to drive most economic activity.

This fits best because the defining features are private ownership and profit motivation within a market framework. A mixed economy still features private ownership but includes government intervention, so it isn’t purely private. A command economy is characterized by state ownership and centralized planning, not private ownership. Barter describes a method of exchange, not a system that identifies ownership or profit motives.