Question
In a command economy, the government sets production quotas and prices for all goods.
What is a potential disadvantage of this system compared to a market economy?
It may lead to inefficiencies and shortages due to lack of market signals
It encourages innovation and competition among producers
It allows consumer demand to directly influence production
It ensures that all goods are produced based on consumer preferences
What is a potential disadvantage of this system compared to a market economy?
It may lead to inefficiencies and shortages due to lack of market signals
It encourages innovation and competition among producers
It allows consumer demand to directly influence production
It ensures that all goods are produced based on consumer preferences
Answers
GPT-4o mini
The potential disadvantage of a command economy compared to a market economy is:
**It may lead to inefficiencies and shortages due to lack of market signals.**
In a command economy, the government controls production quotas and prices, which can result in misallocation of resources, as there are no market-driven signals (like supply and demand) to guide production decisions. This can lead to inefficiencies and shortages of goods that consumers actually want.
**It may lead to inefficiencies and shortages due to lack of market signals.**
In a command economy, the government controls production quotas and prices, which can result in misallocation of resources, as there are no market-driven signals (like supply and demand) to guide production decisions. This can lead to inefficiencies and shortages of goods that consumers actually want.