Mixed Economies

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What to produce? A combination of the public and private sectors determine what is produced in a mixed economy.  For the most part, firms rely on the free interaction of supply and demand to form an equilibrium price which in turn determines how many resources will be allocated towards producing that good.  However, in some sectors the government might intervene to alter how much is produced (eg. by taxing demerit goods).  Alternatively the Government can actually produce the product themselves (like the SOE KiwiRail in New Zealand which provides train services) or ban the product from the market entirely (Cannabis).  Governments will provide public goods

How to Produce? Generally, firms will use the most efficient methods of production to minimise costs and maximise profits.  However the government also has a hand in this - they can force firms to take their external costs into account using a "Carbon Tax".  This…


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