In a planned economy,
A)prices are used to coordinate economic activity.
B)central planners set production targets and tell producers how to produce.
C)high prices discourage use of the most scarce resources.
D)central planners allow the price to determine distribution of a product.

Question

Quizplus · Accepted Answer

In a planned economy, central planners set production targets and instruct producers how to produce in order to achieve those targets. Prices are not used as a mechanism to coordinate economic activity. Instead, the central planners allocate resources based on their own calculations and priorities. Therefore, options A, C, and D are all incorrect.

In a Planned Economy