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Question

Difficulty: EasyMixed Economy

Match each economic activity or characteristic of a mixed economy on the left with its corresponding sector or mechanism on the right.

  • Provision of street lighting and national defencePublic Sector
  • Production of consumer goods guided by profit motivePrivate Sector
  • Use of taxes and subsidies to correct market failureGovernment Regulation

Answer

Public goods such as street lighting and national defence are matched with the Public Sector; profit-driven consumer goods production is matched with the Private Sector; and corrective fiscal policy measures are matched with Government Regulation.
In a mixed economy, economic functions are divided between the public sector (providing public goods), the private sector (producing goods for profit via market demand), and government regulatory authorities (using policies to correct market failures).

Step-by-Step Solution

1
Identify the sector responsible for providing non-rival and non-excludable public goods.
Street lighting and national defence belong to the Public Sector.
The private market fails to supply public goods efficiently due to the free-rider problem.
2
Identify how private individuals and firms operate in a mixed economy.
Profit-motivated production of consumer goods belongs to the Private Sector.
In a mixed economy, market forces govern the allocation of private goods.
3
Determine the tool used by the state to guide or modify market outcomes.
Taxation and subsidies belong to Government Regulation.
The state uses policy controls to address externalities and promote economic stability.

Key Concept

Dual sector structure and state regulatory mechanisms in a mixed economy
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Topics

Mixed Economy

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