BCC Macro 17 Ch 2,30

BCC Macro 17 Ch 2,30 - 2 The Market System and the Circular...

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2 The Market System and the Circular Flow
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Economic Systems Economic System Defined Ownership of Factors of Production Method Used to Motivate, Coordinate, and Direct Economic Activity Command System Socialism or Communism Market System Capitalism Pure Capitalism – Laissez-Faire 2.1
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The Market System Private Property Freedom of Enterprise Freedom of Choice Characteristics Free Mostly Free Mostly Unfree Repressed 1- Hong Kong 3- Ireland 9- United States 22- Belgium 33- Spain 44- France 81- Brazil 111- China 122- Russia 150- Cuba 152- Venezuela 157- North Korea Source: Heritage Foundation (www.heritagefoundation.com) and The Wall Street Journal
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The Market System Self-Interest Competition Markets and Prices Technology and Capital Goods Specialization Division of Labor Characteristics 2.2 2.3
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The Market System Geographic Specialization Use of Money Medium of Exchange Barter Active but Limited Government Characteristics
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The Market System What Goods Will Be Produced? Consumer Sovereignty Dollar Votes Five Fundamental Questions
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Dollar Votes Bushman San Francisco Catman Key West
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Economic or Pure Profit Normal Profit Expanding Industry Declining Industry WHAT WILL BE PRODUCED? Economic Profit = Total Revenue – Total Cost
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WHAT WILL BE PRODUCED? Economic Profit = Total Revenue – Total Cost Example: Total Revenue $450 Costs: Labor $200 Land $100 Capital $100 Entrepreneurial Normal Profit (Cost) $ 50 Economic Profit $ 0 Example: Total Revenue $500 Costs: Labor $200 Land $100 Capital $100 Entrepreneurial Normal Profit (Cost) $ 50 Economic Profit $ 50 Would you operate your business with no economic profit? What do economic profits mean for your business?
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WHAT WILL BE PRODUCED? Economic Profits Breed Ruinous Competition Expanding Industry = Has economic profits Declining Industry = Less than economic profits
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The Market System How Will the Goods Be Produced?
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This note was uploaded on 06/05/2009 for the course ECO ECO2013 taught by Professor Jominy during the Summer '08 term at Broward College.

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BCC Macro 17 Ch 2,30 - 2 The Market System and the Circular...

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