Discuss some of the changes in the organization of the economic systems of countries transitioning from communism to capitalism. How does this type of market reform increase economic efficiency?

What will be an ideal response?

Instead of government officials making production decisions, in an economy governed by capitalism, goods are traded in markets at market-determined prices. Government-owned firms are frequently sold to private investors and individuals are permitted to start their own firms. Market efficiency is improved in a variety of ways. Competitive markets push firms to become efficient and to make production decisions based upon economic motives rather than political or other non-economic ones. Competitive markets result in an efficient allocation of production across firms and the amount of each good that is produced and consumed maximizes aggregate surplus. Finally, competitive markets allocate goods to the consumers who value them the most.