who controls the factors of production in a free market economy
Market economy Market economies do not logically presuppose the existence of private ownership of the means of production. A market economy can and often does include various types of cooperatives, collectives, or autonomous state agencies that acquire and exchange capital goods in capital markets. These all utilize a market-determined free price system to allocate capital goods and labor.[3] In addition, there are many variations of market socialism, some of which involve employee-owned enterprises based on self-management; as well as models that involve the combination of public ownership of the means of production with factor markets.[7]
Economics Theory and observation set out the conditions such that market prices of outputs and productive inputs select an allocation of factor inputs by comparative advantage, so that (relatively) low-cost inputs go to producing low-cost outputs. In the process, aggregate output may increase as a by-product or by design.[37] Such specialization of production creates opportunities for gains from trade whereby resource owners benefit from trade in the sale of one type of output for other, more highly valued goods. A measure of gains from trade is the increased income levels that trade may facilitate.[38]