A central planner can only allocate production across firms in a way that minimizes total costs if:
A) the market is a perfectly competitive market.
B) the central planner has perfect information on the firms' costs.
C) free markets fail to achieve this kind of efficiency.
D) the costs of production are equal across all firms.

Question

Quizplus · Accepted Answer

In order to minimize total costs, the central planner needs to have perfect information on each firm's costs. Without this information, it would be impossible to allocate production in an efficient manner. A perfectly competitive market and equal costs across all firms would make it easier for the central planner to allocate production efficiently, but perfect information is the key factor. Free markets could potentially achieve this kind of efficiency, but the question does not mention any failures of free markets.

A Central Planner Can Only Allocate Production Across Firms in a Way