which statement best describes a command economy? a. government intervention in economic choices is strictly forbidden b. the government determines economic choices and makes most decisions c. the decisions made by producers and consumers drive all economic choices d. producers and consumers make some economic choices while the government makes others
The Correct Answer and Explanation is:
Correct Answer:
b. The government determines economic choices and makes most decisions.
Explanation
A command economy is an economic system in which the government has significant control over the production, distribution, and consumption of goods and services. In this system, the central authority, usually the government, makes most or all economic decisions. This includes deciding what goods and services will be produced, how they will be produced, and who will receive them.
This model contrasts sharply with a market economy, where individuals and private businesses make decisions based on supply, demand, and price mechanisms. In a command economy, the price system is often manipulated or fixed by the government rather than determined by the free market.
Historically, command economies have been associated with communist and socialist states, such as the former Soviet Union, North Korea, and Cuba. In these countries, the government owns most or all means of production, including factories, land, and natural resources. The goal is often to eliminate inequality and allocate resources fairly, but in practice, command economies tend to suffer from inefficiency, lack of innovation, and poor responsiveness to consumer needs.
In a command economy:
- Workers may be assigned jobs by the state rather than choosing employment.
- The government often sets production targets and output quotas.
- Consumer choice is usually limited, as there may be fewer available products.
- There is less competition, since private ownership and entrepreneurship are restricted.
The other answer choices reflect characteristics of other economic systems:
- (a) reflects anarcho-capitalism or a pure free market, which is extremely rare.
- (c) describes a market economy.
- (d) describes a mixed economy, which blends government control with market forces.
Thus, the best description of a command economy is answer (b): the government determines economic choices and makes most decisions.
