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A free market system is similar to a decentralized system, in that the government doesn't try to impose price controls, quotas or other artificial limits on production. The market - what people want and what they are willing to pay for it - determines production. Unlike in decentralization the state maintains some controls over the system, attempting to ensure that the markets remain truly free and is not distorted by monopolies or corruption.
A state may have some free markets while maintaining more control over others that it considers critical to the state's survival. In modern times these usually include the production and dispersion of energy and the production of weapons.