Question

One reason that a command economy might be preferred to a capitalist economy is because in a command economy producers have more incentive to produce things efficiently.

a) True
b) False

Answer 1

It is false to claim that producers have more incentive to produce efficiently in a command economy. In fact, private property rights in a market economy foster greater efficiency and innovation because individuals directly benefit from their efforts.

Step-by-step explanation:

The assertion that in a command economy producers have more incentive to produce things efficiently is false. In a command economy, the government decides what goods and services will be produced, what methods of production will be used, and sets wages for workers, often leading to a lack of incentives to work harder or innovate. On the other hand, market economies with private property rights have shown to encourage owners to be more efficient or work harder, as they benefit directly from any extra effort and investment, leading to increased productivity and innovation.

In examples like China's former collective farming system, when individuals had less ownership, there was less incentive to invest in land, resulting in lower production. Contrastingly, where individuals had more ownership rights, productivity increased.

In a capitalist economy, the incentives for efficiency and innovation are typically stronger since individuals and businesses are free to make their own production and investment decisions based on market demands, and they reap the rewards of their labor and ingenuity.