Question

Suppose an independent New Mexican energy company wants to raise rates by 15 percent, but the state government refuses to allow the increase. Which type of economic system does this best exemplify?

Answer 1

It would best exemplify a command economy.

Answer 2

The correct answer to this open question is the following.

Suppose an independent New Mexican energy company wants to raise rates by 15 percent, but the state government refuses to allow the increase. The type of economic system that this best exemplify is a command economy.

In a command economy, it is the federal government who owns most of the means of production in the nation. In a command economy, it is the state decides what to produce, when to produce it, the amount to produce, and the price of the products. It is the opposite of a free-market economy. That is why the independent energy company could not raise rates by 15 percent. However, this is not the case of México. México is a free-market economy, that is part of NAFTA, the North American Free Trade Agreement (México, Canada, and the United States).