Which of the following is true of an economy that operates entirely through central planning?
A) An individual's success in business is based on political savvy rather than economic proﬁtability.
B) There is relative ease in matching resource allocation to consumer demand by the central planners.
C) Central planners receive market information and coordinate economic activity through the price mechanism.
D) The system adapts easily to technological change, because there is a healthy entrepreneurial spirit.

Question

Quizplus · Accepted Answer

In a centrally planned economy, individual success is often dependent on political connections and favoritism rather than economic profitability, as the central planners control all business decisions.

Answer: B
 It is difficult for central planners to accurately match resource allocation to consumer demand, as they do not have access to the market signals provided by prices in a market-based economy.

Answer: C
 Central planners do not receive market information through the price mechanism, as prices are set by the planners themselves. They rely on input from various sources, such as production reports and surveys of consumer preferences, to coordinate economic activity.

Answer: D
 Central planning is typically less adaptable to technological change and innovation than market-based economies, as there is less incentive for individual entrepreneurs to invest in research and development or pursue new business opportunities.

Which of the Following Is True of an Economy That