Which statement is generally true of a communist economy?

Which statement is generally true of a communist economy?

• A. Government agencies are involved in production planning
• B. Private ownership dominates
• C. Free markets determine prices
• D. Competition among private firms drives growth

Answer: (A)

In a communist economy, the state directs economic activity through central planning. Government agencies are responsible for setting production targets, allocating resources, and coordinating what gets produced and in what quantities. This centralized planning is the defining feature that shapes how the economy operates, rather than market signals alone. That’s why the statement describing government agencies as involved in production planning is the best fit. In contrast, private ownership dominating, free markets determining prices, or competition among private firms driving growth all resemble capitalist or market-based systems, where private actors and market forces play the central roles. In a communist framework, private ownership is limited or absent, prices are typically set by planners, and competition among private firms is minimal.

In a communist economy, the state directs economic activity through central planning. Government agencies are responsible for setting production targets, allocating resources, and coordinating what gets produced and in what quantities. This centralized planning is the defining feature that shapes how the economy operates, rather than market signals alone.

That’s why the statement describing government agencies as involved in production planning is the best fit. In contrast, private ownership dominating, free markets determining prices, or competition among private firms driving growth all resemble capitalist or market-based systems, where private actors and market forces play the central roles. In a communist framework, private ownership is limited or absent, prices are typically set by planners, and competition among private firms is minimal.