Question

Cuba is a command economy that suffered a decline in economic growth because of a cut in support from the former Soviet Union when it collapsed. As a consequence, Cuba:

A. Experienced an outward shift of its production possibilities curve.
B. Experienced an inward shift of its production possibilities curve.
C. Moved along its existing production possibilities curve.
D. None of the above.

Answer 1

Cuba B. experienced an inward shift of its production possibilities curve due to the cut in Soviet support, indicating a decrease in its capacity to produce goods and services.

Step-by-step explanation:

When the Soviet Union collapsed in 1991, Cuba, as a command economy, experienced a severe cut in support which led to a decline in economic growth.

The correct answer to the question is B. Experienced an inward shift of its production possibilities curve.

This means that Cuba's ability to produce goods and services decreased due to the reduction in aid from the Soviet Union.

An inward shift of the production possibilities curve indicates that a country can produce less than it could before, which may be caused by factors such as a decrease in available resources or technology.

Command economies like Cuba rely heavily on government decisions for production and distribution, which contrasts with market economies where supply and demand guide these decisions.

Cuba's economy is a relevant example of how the collapse of an aiding superpower can impact a country with a command economy, leading to scarcity of resources and less economic output and efficiency.