Question

How do command economies answer the three basic economic questions?

The past will guide producers in what goods to produce, how to produce them, and for which consumers to produce them. The past will guide all decisions.


The government will decide what goods to produce, how to produce them, and for which consumers to produce them. The government will make all decisions.


Supply and demand will guide producers in what goods to produce, how to produce them, and for which consumers to produce them. All economic decisions with be guided by supply and demand.


Supply and demand will guide producers in what goods to produce, how to produce them, and for which consumers to produce them. The government will intervene to ensure fairness and productivity.



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Answer 1

The second option is correct:

"The government will decide what goods to produce, how to produce them, and for which consumers to produce them. The government will make all decisions."

Explanation (brief): In a command economy central planners (the government) set production targets, allocate resources, choose production methods, set prices and wages, and determine distribution—so the state answers the three basic economic questions instead of markets or tradition.