Which statement best describes a command economy?

• A. Individuals and private firms own most of the resources and make decisions independently.
• B. The government makes all major economic decisions and controls the allocation of resources.
• C. Economic decisions are made based on customs, traditions, and cultural practices.
• D. Prices and production are determined by the forces of supply and demand in the market.

Answer: (B)

Verified step by step guidance

1. Understand the definition of a command economy: it is an economic system where the government centrally plans and controls major economic activities, including resource allocation, production, and distribution.
2. Recognize that in a command economy, individuals and private firms have little to no control over economic decisions; instead, the government makes these decisions.
3. Contrast this with other economic systems: in a market economy, prices and production are determined by supply and demand; in a traditional economy, decisions are based on customs and traditions; and in a mixed economy, there is a combination of government and private decision-making.
4. Identify the statement that aligns with the characteristics of a command economy, which is that the government makes all major economic decisions and controls the allocation of resources.
5. Conclude that the correct description of a command economy is the one emphasizing government control over economic decisions and resource allocation.