The greater the division of labor in an economy, the greater the need

OFFICIAL EXPLANATION

C is the correct answer. If, as the first statement claims, greater division of labor entails a greater need for coordination and if, as the second statement claims, there is always more division of labor in market economies than in planned economies, then it must be true that the need for coordination in market economies is greater than in planned economies.

The first choice is incorrect. If the statements are true, then it is possible, and even expected, that disruptions of supply and production are NOT more frequent in planned economies than in market economies. The statements suggest that since there is always more division of labor in market economies than in planned economies, there is potentially a greater number of disruptions in market economies than in planned economies. B is not correct. One would expect there to be fewer, not more, specialized producers in planned economies than in market economies, other things being equal. This is because, according to the statements, there is always more division of labor in market economies than in planned economies and because increased division of labor entails a larger number of specialized producers. The fourth answer choice is incorrect. The statement lead to the conclusion that a manager’s task would be harder, not easier, in a market economy than in a planned economy. This is because the increased division of labor that exists in a market economy entails a larger number of specialized producers. The last answer choice, E is also incorrect. The statement that division of labor functions more effectively in market economies than in planned economies does not follow from the statements given. The statements imply that such effectiveness is dependent on the amount of coordination available, but no information concerning that amount is given.