Question

In a command economy, how is it determined what goods and services will be produced?

A)Businesses decide what to produce on the basis of market conditions.B)Consumers decide through their behavior in the marketplace.C)Central government planning decides what will be produced.D)Supply and demand control production and price.

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Answer 1

The answer is C), central government planning determines what will be produced.

Answer 2

The correct answer is C. In a command economy, central government planning decides what will be produced.

Step-by-step explanation:

A command economy means that only the government has the right to provide goods and services, which means that the market mechanism (balance between supply and demand) is canceled. In a command economy, consumers can only steer the supply by moving politicians to that end. That is why there is talk of a supply-oriented economy.

Command economies are mainly encountered in the communist state system, but in some capitalist states the government also partially determines the price of certain products (mixed economy). Command economy still exists in Cuba, North Korea, Vietnam, Laos and the People's Republic of China (which is now developing a form of a partial free-market economy through economic reforms).