Which statement best describes a command economy?
Group of answer choices
A The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government.
B The production and allocation of goods and services is determined primarily through markets.
C The production and allocation of goods and services is determined primarily through government.
D The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets.
The correct answer and explanation is :
The correct answer is C: The production and allocation of goods and services is determined primarily through government.
Explanation:
A command economy, also known as a planned economy, is an economic system where the government has significant control over the production, allocation, and pricing of goods and services. In a command economy, the central government makes most, if not all, decisions about what to produce, how to produce it, and for whom the goods and services are produced. This stands in contrast to other economic systems like a market economy, where decisions about production and allocation are primarily determined by market forces (supply and demand).
In a command economy, the government typically owns or controls major industries, such as energy, transportation, and healthcare, and directly allocates resources to different sectors of the economy. The government sets production goals for various industries and determines the distribution of goods and services. Individuals and businesses do not have the freedom to make decisions based on market signals such as prices or consumer demand. Instead, the government may set prices for goods and services, often at levels that are different from what would be determined in a free-market economy.
Examples of command economies include the former Soviet Union, North Korea, and Cuba. These economies operate under the assumption that the government, rather than individual consumers or businesses, knows best how to meet the needs of society. However, command economies have often been criticized for inefficiency, as central planners may not have access to all the information necessary to make optimal decisions. Additionally, the lack of competition can stifle innovation and lead to shortages or surpluses of goods and services.
In contrast, in a market economy (as described in answer choice B), production and allocation are determined primarily by market forces, and in a mixed economy (as implied in answer choice A), market forces and government intervention coexist.