What characterizes a command economy?

What characterizes a command economy?

• A. Markets determine prices through supply and demand.
• B. Government officials make all basic economic decisions.
• C. Small business ownership drives production.
• D. Consumer sovereignty dictates production.

Answer: (B)

A command economy centers on centralized planning where the government makes the major economic decisions. In this system, the state owns the most important resources and determines what to produce, how to produce it, and for whom, with a central plan guiding production and distribution. Prices are usually set by the government rather than by market forces, and production decisions align with the plan rather than consumer demand. This is why the best description is that government officials make all basic economic decisions. The other options describe features of market or mixed economies: markets determining prices through supply and demand, private ownership driving production, and consumer preferences guiding production are not characteristic of a command economy.

A command economy centers on centralized planning where the government makes the major economic decisions. In this system, the state owns the most important resources and determines what to produce, how to produce it, and for whom, with a central plan guiding production and distribution. Prices are usually set by the government rather than by market forces, and production decisions align with the plan rather than consumer demand.

This is why the best description is that government officials make all basic economic decisions. The other options describe features of market or mixed economies: markets determining prices through supply and demand, private ownership driving production, and consumer preferences guiding production are not characteristic of a command economy.