Question

Both countries once tried to boost production through central planning. Government tried to control economic activity by formulating a series of Five-Year Plans to guide their management of the economy. But managing a large, complex economy proved difficult, and when the plans failed to meet preset quotas, shortages resulted. Transitioning to capitalism frees an economy from central planning and lets free market forces set supply. When a shortage develops

A) Consumers benefit from lower prices
B) Government intervention is required
C) Market forces correct the imbalance
D) The economy collapses

Answer 1

When a shortage develops in a market system that has transitioned from central planning to capitalism, market forces correct the imbalance, as opposed to planned economies where government interventions might be the norm.

Step-by-step explanation:

Both countries transitioned from central planning economies to market systems with the inherent belief that market forces correct the imbalance experienced when shortages develop. In a planned economy, governments attempt to manage the economy through directives such as Five-Year Plans, but shifting to a form of capitalism allows the free market forces to dictate supply and demand dynamics. Therefore, when a shortage occurs in a transitioned market system, the most expected outcome is that C) Market forces correct the imbalance. Prices might temporarily rise, signaling to producers to increase production, and incentivize new players to enter the market, until supply meets demand and prices stabilize.