Chapter 1R, Problem 21MCQ

To determine

The question requires us to determine the fundamental problem with the command economy.

Explanation of Solution

In a command economy, the government decides the production and consumption capacities in the market. In such a market, the producers have to bear the non-profit businesses as they can’t set their own prices. So, lack of incentive is a common problem in a command economy.

The incentive is a motivational factor behind the choices made by producers and consumers. It can be rewards or punishments based on the activity of individuals. A property right is an example of an incentive that benefits the producers in a matter of ownership of the goods and services they are producing.

Therefore, an incentive is a common problem in a command market.

Option “c” is correct here.

Economics Concept Introduction

In a command economy, the government with the help of participant authorities decides the production and consumption capacities. The government plays a significant role in such economy.