Econ ch.3
________________ is an economic system in which the means of production are privately owned and operated for a profit.
Capitalism
_______________ traces its philosophical roots to the work of 19th Century Philosopher Karl Marx.
Communism
_________________ is the subfield of economics that compares and contrasts the structure and performance of different types of economic organization.
Comparative Economic Systems
____________ refers to the freedom of an individual to choose to purchase (or to choose to not purchase) a good or service at a price determined in a free market.
Consumer sovereignty
Which of the following is a basic characteristic of Capitalism?
Economic decisions occur in markets
_________________ refers to the skills, education, and training which individuals in the labor force possess.
Human Capital
Alec Nove described ___________________ as "when the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel."
Indicative Planning
________________ first said "From each according to his ability, to each according to his need."
Louis Blanc
command planning
an environment in which the government directly controls nearly all economic activity, and almost all production takes place within enterprises owned/controlled by the government.
indicative planning
an environment in which the government guides the behavior of individuals in regards to economic decisions by establishing policies which alter costs and benefits.
In a free market economy, households
are the ultimate consumers of most finished goods/services, are the primary suppliers of labor to firms, & do not behave as "rational decision makers."
One of the three primary types of "economic incentives" is "moral suasion," which could be described as
attempts to convince individuals to behave in a certain manner because doing so is "the right thing to do."
moral suasion
attempts to convince individuals to behave in a certain manner because doing so is the right thing to do
In the writings of Karl Marx, the "bourgeoisie" referred to the _______________ and the "proletariat" referred to the _______________.
business owners; working class.
In a typical modern economy, it is common for Government to have an impact on economic outcomes by
defining and enforcing property rights, regulating the behavior of business, and redistributing income.
feudalism
economic system in which land ownership is restricted to an aristocratic nobility.
Communism
economic system in which the means of production are collectively owned by all people in a society (without intervention by a government or state) ♣ A stateless, classless economic system in which all the factors of production are owned by the workers and people share in production according to their needs: "From each according to his ability, to each according to his need" (Louis Blanc in "The Organization of Work," 1839)
socialism
economic system in which the means of production are owned by the government.
capitalism
economic system in which the means of production are privately owned and operated for a profit.
four primary economic institutions
households, firms, markets, and government
Consider the costs of complying with bureaucratic regulations to economic decision makers in Singapore, Poland, and Venezuela. According to the results of the "Ease of Doing Business" study, of these three countries, such costs are:
lowest in Singapore and highest in Venezuela
three types of economic incentives
material rewards, moral suasion, and coercion.
material rewards
monetary rewards or direct increases in consumption from engaging in an activity.
natural assets
natural resources, including minerals, naturally occurring vegetation, water resources, topographical features, and available agriculturally productive land
On September 4, 2009, California Governor Arnold Schwarzenegger offered a $100,000 reward for anyone who could provide information leading to the arrest and conviction of the arsonists who set a wildfire in southern California which claimed the lives of two firefighters. In this situation, Gov. Schwarzenegger was attempting to obtain the desired information by
offering a material incentive.
The economy of the "former Soviet Union"
perhaps provides the best example of a large society with an economic system close to "pure socialism."
While playing baseball in their front yard, Wally and his little brother break the windshield of Ward's car. Wally and his brother concede that it is right for them to cover the costs of repairing the broken windshield. In taking this position, they are recognizing that Ward has a ______________ in regards to his car windshield.
right to restitution
market
the collection of all potential buyers and all potential sellers of a good or service.
produces assets
the currently available machines, factories, and inventories of finished goods available as industrial capital, as well as social capital such as transportation and communications infrastructure, and educational institutions
consumer sovereignty
the freedom for an individual to choose to purchase (or to not purchase) a good or services at a price determined in a free, unfettered market
economic resources or factors of production
the inputs such as factories, farms, stores, trucks, and equipment used to produce goods and services.
firms
the institutions which transform factors of production into finished goods/services
households
the most fundamental part of any economic system; ultimate consumers of most finished goods/services; primary suppliers of labor
right to restitution
the right to be compensated by another person when he damages your property or infringe upon your rights
right to control
the right to decide how to use your property
right to transfer
the right to obtain ownership of property from or relinquish ownership of property to another person.
Economic system
the rules and methods put in place by a society to answer the three fundamental economic questions of "What to produce?," "How to produce it?," and "For whom to produce it?"
human capital
the skills, education, and training which individuals in the labor force possess
Comparative economic systems
the subfield of economics that compares and contrasts the structure and the performance of different types of economic organization (i.e., different economic systems).
Bourgeoisie
the term which Karl Marx used to refer to business owners
Proletariat
the term which Karl Marx used to refer to the working class.
coercion
the use or threat of force or incarceration in order to obtain compliance.
three dimensions of Private Ownership of Property
(i) "right to control," (ii) "right to transfer," (iii) "right to restitution."
Adam Smith
18th century (1721-1790) Scottish economist, who wrote "An Inquiry into the Nature and Causes of the Wealth of Nations," in which he laid out the central arguments for why private ownership/control of resources and trade in free markets often result in desirable outcomes
Karl Marx
19th century (1818-1883) German philosopher, economist, and revolutionary, who wrote "Das Kapital" (1867, 1884, 1885) and co-wrote (with Friedrich Engels) "The Communist Manifesto" (1848)
_______________ specifies what different parties must do, whatever the external circumstances, and provides for enforcement or compensation for non-performance.
A Contract
Invisible hand
Smith's recognition that under certain conditions, the behavior of self-interested decision makers interacting in free markets leads to outcomes which are better for all parties. ♣ when the "invisible hand" is applicable, any possible alternative to the market outcome would be less desirable for some individuals in society. ♣ "free market forces" are the "invisible hand" that leads us to an outcome that is "efficient" (in that "total social surplus" is maximized).
Which of the following is an example of a "Natural Asset"?
The 1.7 trillion tons of coal reserves in the United States.
In which of the following countries do individuals enjoy the least amount of Economic Freedom?
Venezuela
The present economic system of the United Kingdom would be most accurately described as ______________________, while the present economic system of Spain ______________________.
a Mixed Economy; would also be most accurately described as a Mixed Economy.
government
a decision-making institution with the legal authority to impose restrictions or mandates on the behavior of other decision-makers (i.e., the ability to use legal coercion).
contract
a legal document which specifies what different parties must do, whatever the external circumstances, and provides enforcement or compensation for non-performance
Adam Smith was
an 18th century Scottish economist.
mixed economy
an economic system in which most factors of production are owned and controlled by individuals, while some factors of production are owned and controlled by the state (i.e., a system which contains some elements of capitalism and some elements of socialism).