In which type of economy are prices typically set by the government rather than determined by market forces?

• A. Market economy
• B. Command economy
• C. Traditional economy
• D. Mixed economy

Answer: (B)

Verified step by step guidance

1. Understand the key types of economies: Market economy, Command economy, Traditional economy, and Mixed economy.
2. Recall that in a Market economy, prices are determined by supply and demand through market forces without government intervention.
3. Recognize that in a Command economy, the government centrally plans and controls economic activities, including setting prices.
4. Note that in a Traditional economy, economic decisions are based on customs and traditions, often with limited price flexibility.
5. Identify that in a Mixed economy, both market forces and government interventions influence prices, but prices are not solely set by the government.