Question

Which scenario best represents free enterprise ideals in action?

A. The state government mandates that all public schools must buy books and supplies from one provider.
B. The maker of a child-safety device produces the device at the lowest possible cost and charges the highest possible price.
C. The federal government collects income tax money and uses it to maintain a military force.
D. The only dog groomer in a small town makes a profit even though her prices are high and her work is poor quality.

Answer 1

In a perfect free enterprise system, there would be no government involvement in the economy. This means the government would have no say in where people buy goods/resources, they would not tell business how much product to make, and they would not tell businesses how much to charge for services. Based on this definition, letters A and C can be ruled out.

Another element of the enterprise system is competition. A perfect enterprise system would involve companies keeping to run as effectively and proficiently as possible. That is why we can also rule out D.

This means that B. would be correct, as it focuses on a business running effectively without government interference.