Which of the following represents an economic system based on private ownership and free markets?

The correct answer is capitalism, as this economic system is characterized by private ownership of the means of production and their operation for profit. In capitalism, decisions regarding investment, production, and distribution are driven by the free market, where prices are determined by supply and demand. This system encourages competition and innovation, allowing individuals and businesses to freely engage in economic activities.

In contrast, socialism emphasizes collective or governmental ownership of resources and often involves significant government intervention in economic decisions. Feudalism is a historical system where land ownership and labor were controlled by lords and vassals, with little to no market-based trade as it is recognized today. Communism advocates for a classless system where all property is publicly owned, and each person works and is paid according to their abilities and needs, thereby eliminating the mechanisms of a free market encouraged in capitalism.

Understanding capitalism allows one to appreciate its role in fostering economic growth and individual enterprise, which distinguishes it from the other systems mentioned.