In a market economy, goods are produced based on:

In a market economy, goods are produced based on consumer preferences. This means that production is driven by the demands and desires of consumers. Producers aim to supply goods and services that individuals want to buy, which in turn encourages competition among businesses. This responsiveness to consumer preferences ensures that resources are allocated efficiently, as firms are incentivized to innovate and improve their products to meet the evolving tastes and needs of consumers.

In contrast to this correct choice, government regulations typically dictate certain standards and rules within the market but do not directly determine what goods are produced. Historical methods may influence production processes, but they do not reflect the current preferences of consumers, which are the primary driving force in a market economy. Random selection does not apply in a market economy since production decisions are strategic and based on consumer demand rather than chance. Thus, the focus on consumer preferences is central to understanding how goods are produced within this economic framework.