Mixed Economic System: four questions to try now
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Question 1
China is moving towards a more mixed economic system and reducing the role of the public
sector.
Which economic policy measure might best achieve this?
Answer: B.
Reducing the role of the public sector means shifting activity into private hands, so the policy has to build up the private sector's ability to do the work. Encouraging competition among private firms does that: competition brings new entrants, forces efficiency, and creates the range of suppliers needed before the state can withdraw from an industry without leaving a gap. Creating excess capacity in state-owned enterprises moves in exactly the wrong direction, because it enlarges the public sector rather than shrinking it. Subsidising transport infrastructure is government spending, so it increases state involvement rather than reducing it, however useful the roads and railways may be. Protecting infant industries means tariffs or quotas shielding young domestic firms from foreign competition, which is intervention in the market rather than a step away from it, and it also works against the competition that the correct answer relies on.
Question 2
What is a major advantage of a market economic system over a mixed economic system?
Answer: A.
The correct answer is A: all production of goods and services is determined by consumer demand.
In a pure market system, consumer sovereignty is complete. Prices signal what consumers want, profits reward firms that supply it, and losses eliminate those that do not. No output is directed by government according to political priorities, so the whole pattern of production follows expressed consumer demand. In a mixed economy the state produces public goods, subsidises merit goods and restricts demerit goods, so consumers do not determine everything, which is what makes A a genuine point of difference.
Why the other options are wrong:
In a pure market system, consumer sovereignty is complete. Prices signal what consumers want, profits reward firms that supply it, and losses eliminate those that do not. No output is directed by government according to political priorities, so the whole pattern of production follows expressed consumer demand. In a mixed economy the state produces public goods, subsidises merit goods and restricts demerit goods, so consumers do not determine everything, which is what makes A a genuine point of difference.
Why the other options are wrong:
- B, ownership divided between private and public sectors, is the definition of a mixed economy, not an advantage of a market one.
- C, producers including external costs in the price, is exactly what markets fail to do. Ignoring externalities is the classic market failure, and correcting it is a main argument for the mixed system.
- D, an even distribution of income and wealth, is the opposite of what markets deliver. Market outcomes reward those with scarce skills and capital, and inequality is one of the strongest criticisms of the system.
Question 3
Which situation indicates a mixed economy?
Answer: C.
The correct answer is C: services are provided by both private and public sectors.
A mixed economy combines private enterprise with government provision. Most goods and services are produced by private firms responding to prices and profit, while the state supplies public goods such as defence and street lighting, provides or subsidises merit goods such as health and education, and regulates markets where they fail. Both sectors operating together is precisely what "mixed" means, and every real economy is mixed to some degree.
Why the other options are wrong:
A mixed economy combines private enterprise with government provision. Most goods and services are produced by private firms responding to prices and profit, while the state supplies public goods such as defence and street lighting, provides or subsidises merit goods such as health and education, and regulates markets where they fail. Both sectors operating together is precisely what "mixed" means, and every real economy is mixed to some degree.
Why the other options are wrong:
- A, activity controlled entirely by the private sector, describes a pure market economy, with no public sector at all.
- D, the government carrying out all planning and decision making, describes a planned or command economy, where the state allocates resources administratively.
- B, individual choices unaffected by government actions, again describes a pure market system. In any mixed economy taxes, subsidies and regulations shape what people can afford and what is available, so choices are inevitably influenced.
Question 4
Unlike the UK and US, a significant proportion of the shares on the stock exchanges of China and Russia are of state-owned enterprises. Which judgement about China and Russia can be made from this information?
Answer: D.
Who OWNS the means of production is what defines an economic system. Large numbers of state-owned enterprises point to a mixed economy with a substantial planned element, as against the more market-based systems of the UK and US. Ownership tells you nothing directly about how income is distributed, how developed the country is, or which stage of production its firms occupy.
What this practice covers
These questions are drawn from past Cambridge IGCSE papers. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on mixed economic system, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Saying a mixed economy is "half market, half planned". The balance varies widely between countries.
- Confusing the public sector (government-owned) with public goods (non-rival, non-excludable). A state school is public sector but not a public good.
- Listing interventions without saying which market failure each one fixes.
- Assuming intervention always improves things, mention government failure.
- Forgetting the opportunity cost of government spending.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Mixed Economic System revision notes.