The Incentive Problem Under Communist Central Planning Refers to the Idea

question 2

Multiple Choice

The incentive problem under communist central planning refers to the idea that

• A) planners had to direct required inputs to each enterprise.
• B) workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
• C) the immediate effect of more investment was less consumption.
• D) exports had to be equal to imports for a central plan to work.

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Definitions:

Price-Support Program

Government policies designed to maintain the price of a commodity at a certain level through subsidies or purchase of the market surplus.

Price Supports

Government interventions to maintain the market price of a commodity at a certain level to protect producers from market fluctuations.

Price Floor

A government or regulatory-imposed minimum price for a commodity or service, intended to prevent the market price from falling below a certain level.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, service, or commodity, usually intended to protect consumers.