Suppose resources are directed by means of a central planner who receives information on all the different uses of these resources. Why might sellers have an incentive to not provide truthful information to the central planner?
A) Sellers 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 that 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 to ensure they continue receiving resources, as they might fear losing out if the central planner reallocates resources based on perceived importance.

Suppose Resources Are Directed by Means of a Central Planner