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:

Specific Tariffs

Taxes imposed on imported goods at a specific rate per unit, such as per ton or per item, instead of a percentage of value.

Tariff

A tax imposed on imported goods to protect domestic industries or to generate revenue.

Imports

Goods and services bought by residents of a country from other countries.

Opportunity Costs

The loss incurred by not opting for the alternative that stands as the next best choice during decision-making.