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Would you expect a centrally planned economy to be better at productive efficiency or allocative efficiency? Be sure to define productive efficiency and allocative efficiency in your answer.
Centrally planned economies are generally characterized by absence of democracies. In such economies, all the decisions are centrally planned. Governments in such economies ban imports or restrict them. This leads to lack of competition and lack of productive efficiency as a result. This leads to high level of inefficiency and poverty in such economies.
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so, Chapter one section to Problem number 11. It's asking us, What would we expect out of essentially planned economy? Would they be better, productive, efficiency, allocated efficiency? And in our answer, we should be defining these two forms of efficiency as well. Well to start off essentially planned economy is essentially where the government decides what goods and service is will be provided. Because these economies Arjun, generally characterized by the absence of democracies and, as essentially planned, these God, the government's also in an attempt to protect their own domestic industries and domestic products they ban imports released were stripped them very, very heavily. As a result, this leads to decrease competition for the industries and look providers of goods and service is within the country, and this leads to lack of productive efficiency as well as allocated efficiency. Because cut, the companies have no incentive, no forms of competition to there. Goods and service is that they produce because the government is essentially saying they're essentially living all competition against them. But productive efficiency is when a good or service is produced at the lowest cost and allocated. Efficiency is when production aligns with consumer preferences and since the government is deciding, we're basically dictating what goods and service is should be provided. These two forms of efficiency are, but it's very hard for them to exist because the companies that provide the goods and service is basically have no incentive to do so. There's no economic benefit to do so.
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