Which economic theory advocates for free competition and a self-regulating market?

The chosen response aligns with the economic theory of liberalism, which emphasizes the importance of free competition and the idea of a self-regulating market. In a liberal economic framework, individuals and businesses have the freedom to operate in their own interests, which is believed to lead to innovation, efficiency, and overall wealth creation in society. This theory is rooted in principles set forth by classical economists like Adam Smith, who argued that individuals pursuing their own economic self-interest inadvertently contribute to the greater good through the "invisible hand" of the market.

In contrast, the other theories listed do not promote free competition to the same extent. Socialism advocates for collective or government control over production and resources, aiming to reduce inequality and provide for basic needs, while communism seeks to eliminate private property entirely for a classless society. Mercantilism, historically, focused on state control over the economy and the accumulation of wealth through trade, often emphasizing protectionist policies rather than free competition. Therefore, liberalism distinctly champions the concept of free-market dynamics.