Texes Social Studies Content Practice Exam

Which economic system is characterized by private property and free markets?

1. A) Socialism

2. B) Capitalism

3. C) Communism

4. D) Mercantilism

The correct answer is: B) Capitalism

The correct answer is capitalism, an economic system where the means of production and distribution are privately owned and operated for profit. In capitalism, free markets play a crucial role, allowing buyers and sellers to negotiate prices and make transactions with minimal government intervention. This system encourages competition and innovation, which can lead to economic growth and efficiency. In contrast, socialism involves collective or government ownership of the means of production, where profits are distributed among the community rather than individuals. Communism represents a more extreme form of socialism, advocating for a classless system where all property is publicly owned, and each person works and is paid according to their abilities and needs. Mercantilism, on the other hand, is an economic theory prevalent in the 16th to 18th centuries that emphasizes the role of government in regulating the economy to increase national power, primarily through stockpiling precious metals and maintaining a favorable balance of trade. Thus, the defining characteristics of private property and free markets clearly align with capitalism, distinguishing it from the other economic systems mentioned.