Which of the following helps explain why mixed economies develop?

• A. Private ownership is prohibited in mixed economies.
• B. Mixed economies eliminate the need for government intervention.
• C. All economies naturally evolve into command economies over time.
• D. Governments and markets both have strengths and weaknesses in allocating resources.

Answer: (D)

Verified step by step guidance

1. Understand the concept of a mixed economy: it is an economic system that combines elements of both market economies (private ownership and free markets) and command economies (government intervention and planning).
2. Recognize that private ownership is not prohibited in mixed economies; rather, it coexists with government regulation and intervention.
3. Know that mixed economies do not eliminate the need for government intervention; instead, they balance the roles of markets and governments to address market failures and provide public goods.
4. Acknowledge that economies do not naturally evolve into command economies; instead, they often develop mixed characteristics to leverage the advantages of both markets and government.
5. Conclude that the reason mixed economies develop is because governments and markets each have strengths and weaknesses in allocating resources, so combining them helps improve overall economic efficiency and equity.