Final answer:
A competitive free market economy operates without government intervention, allowing businesses and individuals to make their own decisions regarding production, consumption, and pricing. However, some government regulation is necessary to ensure fair competition and protect consumers.
Step-by-step explanation:
A competitive free market economy is generally characterized by the absence of government intervention. In this type of economy, businesses and individuals are free to make their own decisions regarding production, consumption, and pricing without government interference. The market forces of supply and demand play a significant role in determining prices and driving competition.
For example, in a competitive free market economy, businesses are allowed to set their own prices based on factors like production costs, consumer demand, and competition. The absence of government intervention allows for greater flexibility and responsiveness to market dynamics.
However, it's important to note that some degree of government regulation is necessary to prevent anti-competitive practices and ensure fair market competition. Governments may enact laws and regulations to address issues like monopolies, fraud, and consumer protection.
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