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Difficulty: EasyCommand Economy (Socialism)

In a socialist or command economy, key economic decisions regarding production, resource allocation, and distribution are primarily made by which of the following?

  1. The government through a central planning authorityAnswer
  2. B
    The forces of demand and supply operating through the price mechanism
  3. C
    Private entrepreneurs competing to maximize individual profits
  4. D
    Consumers expressing preferences through decentralized price signals

Answer

The economic decisions in a command economy are made by the government through a central planning authority.
In a command or socialist economic system, the government owns the principal means of production and allocates resources through a central planning body to address basic economic problems.

Step-by-Step Solution

1
Identify the defining characteristic of a command economy.
In a command (socialist) economy, major factors of production and resources are public property controlled by the state.
State ownership eliminates decentralized market competition.
2
Determine how fundamental economic questions (what, how, and for whom to produce) are answered in this system.
The government utilizes a central planning board to allocate resources and schedule output according to state priorities.
Central planning replaces the price mechanism.

Key Concept

Centralized decision-making and state resource allocation in a command economy
Estimated Time:45s
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Topics

Command Economy (Socialism)

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