1. In a command economy, the government sets production levels and wages.

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Consider the core characteristics of a command economy. 
Option 1: True. In a command economy, the government typically undertakes centralized planning and makes key economic decisions, including setting production targets and determining wages for many or all industries. This reflects the control aspect of resource allocation that defines such systems. 
Option 2: False. If one thought the statement were false, they might claim that prices or outputs are determined by markets or private actors. However, in a command economy, market forces are intentionally limited or absent, with the state guiding production and wages through planning institutions rather than through supply-and-demand interactions. This contrast highlights why the statement aligns with the textbook definition of a command economy. 
Option 3: Consider whether production levels could be left to producers. In a command system, decision-making authority over production levels is centralized, not delegated to firms, which makes this option inconsistent with the defining feature of government-directed planning. 
Option 4: Think about wages. Central planners typically set or regulate wages in a command economy rather than letting market rates emerge from voluntary exchanges, which differentiates it from market-based systems. 
Overall, the distinctive mechanism in a command economy is state-directed allocation of resources, including output quantities and wage schedules, rather than market-driven decisions.

25_2 PHL4100 M Philosophy od Enterprise

1. In a command economy, the government sets production levels and wages.

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