Which statement best describes capitalism?

• A. An economic system based on private property, voluntary exchange, and competitive markets
• B. A centralized command economy
• C. An economy based on barter only
• D. A planned economy with government ownership

Answer: (B)

Capitalism is defined by private property rights, voluntary exchange, and competitive markets. Private property allows individuals to own and control resources, make investments, and reap the benefits or bear the costs of their use. Voluntary exchange through markets coordinates what gets produced and traded, with prices signaling where resources are most valued. Competitive markets drive efficiency and innovation because firms compete for consumers who can freely choose among options. The other descriptions describe planned or command economies, where the government largely determines production and ownership, or barter-based systems that lack a formal price mechanism—features not characteristic of capitalism.