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Calculation of profit and loss - Practice Questions

1. Ludwig von Mises and F.A. Hayek took part in the “Socialist Calculation Debate.” They argued that, *

centrally planned economies would outperform capitalist countries

centrally planned economies would be less efficient than capital countries

centrally planned economies and capitalist economies would be equally efficient and perform equally well

2. Prices in a market economy *

allow for the calculation of profit and loss and help determine if an investment is good for a firm

distorts signals regarding scarcity and societal value

are one reason that central planning may be superior to capitalism

3. Which of the following is a reason that governments have difficulty in economic calculation? *

they are not driven by profit and loss

projects may be undertaken in order to benefit a small group or political ally

both a. and b.

4. When a political process sets the price of a good or service, the price tends to be: *

too low

too high

at the market clearing level

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