Strengths and weaknesses of the three basic types of economies

Imagine you are a consultant who has been asked to summarize the strengths and weaknesses of Directavia, a nation with a pure command economy.

Which of the following would you include in your report as weaknesses of Directavia's economy? Check all that apply.

The economy cannot quickly change the type of goods being produced to meet new priorities.

The economy experiences persistent shortages and surpluses.

Many goods are available only through a black market.

The price-setting mechanism is particularly vulnerable to the mispricing of goods for which there are externalities.

Question

Business

Jorge Kane

20 December, 12:21

Strengths and weaknesses of the three basic types of economies

Imagine you are a consultant who has been asked to summarize the strengths and weaknesses of Directavia, a nation with a pure command economy.

Which of the following would you include in your report as weaknesses of Directavia's economy? Check all that apply.

The economy cannot quickly change the type of goods being produced to meet new priorities.

The economy experiences persistent shortages and surpluses.

Many goods are available only through a black market.

The price-setting mechanism is particularly vulnerable to the mispricing of goods for which there are externalities.

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Answers (1)

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Shane · Answer 1

These two statements include in your report as weaknesses of Directavia's economy.

The economy experiences persistent shortages and surpluses. Many goods are available only through a black market.

Explanation:

Both choices are valid because goods banned by the government in the black market are distributed at a very high rate in the command economy.

This leads to widespread corruption. Also, the quality in the command economy is not good, since the output is produced by the publicly owned company.

Under mere command economy, there is no competition between companies. All decisions have been taken centrally.