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Question

Difficulty: MediumCommand Economy (Socialism)

A nation operating under a socialist command economy experiences an increased public demand for consumer footwear. How are additional productive resources reallocated to expand footwear manufacturing in this economy?

  1. Direct administrative directives and target adjustments issued by the central planning authorityAnswer
  2. B
    Automatic increases in market prices that signal private investors to shift capital into footwear production
  3. C
    Independent profit-maximizing decisions made by autonomous factory managers
  4. D
    Competitive bidding among consumers that drives up raw material prices and wage rates

Answer

Direct administrative directives and target adjustments issued by the central planning authority
In a socialist command economy, the central planning authority controls state-owned factors of production. Any adjustment to output levels or reallocation of raw materials, labor, and capital must be executed through official central planning directives and state quota adjustments.

Step-by-Step Solution

1
Identify the key characteristics of a command (socialist) economic system.
In a command economy, the state owns factors of production and centralized planning bodies dictate resource allocation, output targets, and distribution.
Understanding the institutional framework determines how economic decisions are made.
2
Analyze how shifts in consumer demand impact production within this system.
Because market price mechanisms and profit motives are absent or restricted, production changes require administrative reassessment and official production quota adjustments by central planners.
Resource reallocation depends on central plan revision rather than price signals.

Key Concept

Resource Allocation in a Command Economy
Estimated Time:1m 0s
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Topics

Command Economy (Socialism)

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