Centralized Economic Planning in the Soviet Union Was the Epitome

question 219

Multiple Choice

Centralized economic planning in the Soviet Union was the epitome of the top-down approach: factories received quotas from Moscow that they had to fill. Enforcing such orders was difficult since there were so many factories to monitor. For example, a nail factory might fulfill an order of 250,000 nails by making very small nails, or substandard nails. Suppose Moscow wants nails to build houses. It is actually paying for:

• A) high-quality nails.
• B) productivity improvements.
• C) scrap metal.
• D) whatever could minimally qualify as a "nail."

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Definitions:

Profit-Maximizing

The process by which a company determines the price and output level that returns the highest profit.

Loss-Minimizing

A strategy or position where a firm aims to reduce its losses to the lowest possible level under adverse conditions, often by adjusting production.

Zero Economic Profits

Zero economic profits occur in a competitive equilibrium when firms earn just enough revenue to cover their total costs, including the opportunity costs.

Short Run

A period of time during which at least one of a firm's inputs is fixed, limiting its ability to increase production.