Command economies provide a more favorable environment for innovation

QUESTION

Command economies provide a more favorable environment for innovation and entrepreneurs than market economies.

Indicate whether the statement is true or false.

ANSWER

FALSE
In a command economy, state-owned enterprises have little incentive to control costs and be efficient, because they cannot go out of business. Also, the abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs; hence, dynamism and innovation are absent from command economies.