A set of arrangements where economic agents can freely exchange their endowments or products with each other. Such an economy is defined as?

Option 1 -> In a centrally planned economy, the government controls production and distribution, limiting free exchange.

Option 2 -> A closed economy refers to no international trade, not the internal mechanism of exchange.

Option 3 -> A market economy allows economic agents to freely exchange goods and services based on supply and demand.

Option 4 -> A socialist economy involves government control over production, restricting free market exchanges.

Hence, Option 3: Market Economy -> A market economy is characterized by voluntary exchange between buyers and sellers, where prices are determined by supply and demand forces. Economic agents (individuals, firms, households) have the freedom to trade their endowments, labor, goods, and services without central authority intervention. This decentralized system of exchange is the defining feature that distinguishes it from planned or command economies. -> correct