ESSAY QUESTIONS FOR ECONOMICS 1B FINAL EXAMEXTENDED SPRING 2013Compare a market economy with a...

Question

ESSAY QUESTIONS FOR ECONOMICS 1B FINAL EXAM
EXTENDED SPRING 2013
Compare a market economy with a command economy.
1. Show, in detail, the advantages of each. 2. Show, in detail, the weaknesses of each. 3. Compare Monopolistic Competition with Pure Monopoly and Perfect Competition. 4. What is the relationship, if there is one, of a market economy and democracy?

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David · Accepted Answer

A market economy is an economy that allocates resources through the 
decentralized decision of many firms and households as they interact in market 
for goods and services. Command economy worked on the premise that central 
planners are in the government were in the best position to guide economic 
activity. Central planning authority decided what goods and services were 
produced, how much was produced, and who produced and consumed these 
goods and services. Command economy believed that only government could 
organize economic activity in a way that promoted economic well being for the 
country as a whole. In market economy, the decisions of central planners are 
replaced by the decision of millions of firms and household. Business firms 
decide whom to hire and what to make. Households choose which firms to work 
for and what to buy. Firms and households interact in the market place, where 
prices and self interest guide their decision. 
Advantages of Market Economy and Command Economy 
The advantage of free market economy is mainly to do with gains from 
international trade, and improving global efficiency through lower prices, 
increased consumer choice and efficiency.

ESSAY QUESTIONS FOR ECONOMICS 1B FINAL EXAM EXTENDED SPRING 2013 Compare a market economy with a command economy. 1. Show, in detail, the advantages of each. 2. Show, in detail, the weaknesses of...

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