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Since World War II, North Korea has had a centrally planned economy in which the government makes the big decisions on how resources will be allocated. Why would you expect North Korea's production possibilities (per person) to be smaller than those of Australia? What are the economic institutions that help the Australian economy achieve allocative efficiency that North Korea might lack?
Allocation Function The shifting or reallocation of production property into or out of markets based on shifts in prices for the products or services produced in that market.
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