Question:
Which of the following is necessary for a well-functioning capitalist economy, but not in a command economy?
(1) Centralized decision-making
(2) Scarcity of resources
(3) Monopolies
(4) Protection of property rights
(5) Positive externalities
Correct Answer:
(4)
Answer Explanation:
A capitalist (free-market) economy relies entirely on decentralized exchange. For markets to function, individuals and firms must have legally protected private property rights over their resources and output. In a command economy, the state owns the resources.
Topic: Economic Systems Year: 2018
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