Question

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?
a. The economy cannot quickly change the type of goods being produced to meet new priorities.b. The economy experiences persistent shortages and surpluses.c. Many goods are available only through a black market.d. The price-setting mechanism is particularly vulnerable to the mispricing of goods for which there are externalities.

Answer 1

Answer:

The correct answers are letters "B" and "C": The economy experiences persistent shortages and surpluses; Many goods are available only through a black market.

Explanation:

A Command Economy is one where the government controls the economy, acting as the central planner, dictating production quotas and distribution levels, and setting prices.  A company weakness describes an internal factor of the organization that could represent a disadvantage for the growth of the firm.

As the government regulates the supply and demand in command economies, it is likely to see shortages and surpluses in its market. This will cause those products to be traded illegally in what is known as the black market.