In the context of factors of production, how does the control of resources differ between a market economy and a command economy?

• A. Neither market nor command economies involve any control over resources.
• B. In a market economy, the government controls all resources, whereas in a command economy, private firms control resources.
• C. In a market economy, resources are primarily controlled by private individuals and firms, while in a command economy, resources are controlled by the government.
• D. In both market and command economies, resources are equally controlled by private individuals.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of factors of production, which include land, labor, capital, and entrepreneurship—these are the resources used to produce goods and services.
2. Step 2: Recognize that in a market economy, the allocation and control of these resources are primarily determined by private individuals and firms through the forces of supply and demand, with minimal government intervention.
3. Step 3: Contrast this with a command economy, where the government has central control over the allocation and ownership of resources, deciding what to produce, how to produce, and for whom to produce.
4. Step 4: Analyze the given options by matching them with the definitions: the correct description is that in a market economy, resources are controlled by private individuals and firms, while in a command economy, resources are controlled by the government.
5. Step 5: Conclude that the key difference lies in who controls the factors of production—private sector in market economies versus government in command economies.