Firms in Planned Economies Focus on Social Welfare

Steps:

• Recall that a planned economy features central government control over production, not market forces.
• Evaluate options against this: A involves prices (market-based), B and C assume profit-driven competition (capitalist traits).
• Identify D as fitting, since state planning incorporates broader societal costs like externalities.
• Confirm D aligns with planned economy goals of efficiency for public good.

Why D is correct:

• In planned economies, firms follow state directives to minimize total social costs (private + external), per central planning theory, prioritizing societal welfare over profits.

Why the others are wrong:

• A: Planned economies lack the price mechanism; production is dictated by government targets.
• B: Firms are state-owned, not profit-oriented for shareholders.
• C: Markets are not competitive; output is allocated centrally without rivalry.

Final answer: D