Which of the following is an example of a command economy?

Which of the following is an example of a command economy?

• A. The government controls resources and makes production decisions.
• B. Prices guide production through supply and demand.
• C. Individuals decide what to produce based on consumer desires.
• D. International trade determines production.

Answer: (A)

In a command economy, the government controls resources and makes production decisions. This means the state decides what to produce, how to use land, labor, and factories, and sets production targets, often owning the means of production. Because decisions come from central planning rather than individuals responding to prices, this setup fits the example given. In contrast, when prices guide production through supply and demand, and individuals decide what to produce based on consumer desires, the economy is driven by market forces rather than central planning. International trade can influence production, but it doesn’t by itself define a command economy.

In a command economy, the government controls resources and makes production decisions. This means the state decides what to produce, how to use land, labor, and factories, and sets production targets, often owning the means of production. Because decisions come from central planning rather than individuals responding to prices, this setup fits the example given.

In contrast, when prices guide production through supply and demand, and individuals decide what to produce based on consumer desires, the economy is driven by market forces rather than central planning. International trade can influence production, but it doesn’t by itself define a command economy.