In a mixed economy, how is the decision of 'how to produce' typically made?

• A. Exclusively by government planning and directives
• B. Solely by private individuals and firms through the market
• C. By a combination of market forces and government intervention
• D. By random allocation without any systematic process

Answer: (C)

Verified step by step guidance

1. Understand the concept of a mixed economy: it combines elements of both market economies and planned economies.
2. Recognize that in a mixed economy, the decision of 'how to produce' is influenced by both private firms seeking profit and government regulations or interventions.
3. Identify that private firms use market signals such as prices, costs, and consumer demand to decide production methods aiming for efficiency and profitability.
4. Acknowledge that the government may intervene to regulate production methods for reasons such as environmental protection, labor standards, or public welfare.
5. Conclude that the decision of 'how to produce' in a mixed economy is made through a combination of market forces and government intervention, rather than exclusively by one or the other.