Question

What type of economy depends on a central government to set prices and production quotas, which often contributes to inefficient production, surpluses, and shortages?

A
command economy

B
market economy

C
mixed economy

D
traditional economy

Answer 1

A. command economy

Step-by-step explanation:

In a command economy, the government own all the resources that exist in that country. The government will also determine how those resources should be distributed. This type of economy completely disregard the power of supply and demand. The consumers will be force to consume a certain type of products that the government made, without having any choice.

The people do not have the right to choose their own occupation and determine the type of products that should be made in the country. The government will determine all of that.

Because this, the people do not have incentives to actually work harder and pursue their passion. This often lead to a reduction in work productivity, which lead to inefficient production.