Suppose resources are directed through the actions of a central planner, who receives information on all the different uses of these resources. Why might sellers have an incentive to provide untruthful information to the central planner?
A) They want to be able to charge the minimum price for their product
B) In order to continue producing their product, sellers may overstate the importance of their product.
C) The information system is too complex to provide correct information.
D) They want resources to be able to travel to the highest value uses possible

Question

Quizplus · Accepted Answer

Sellers may overstate the importance of their product in order to ensure that their resources continue to be directed towards their production. This may lead to an inefficient allocation of resources if the central planner allocates resources based on this untruthful information.

Suppose Resources Are Directed Through the Actions of a Central