MicroEconCh.3-partCh.4

MicroEconCh.3-partCh.4 - Modern Economics 1. Extensive use...

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Sheet1 Page 1 Modern Economics 1 Extensive use of Capital 2 Specialization and division of Labor 3 Money Adam smith 8/26-Different Markets 08/26/09 02:15:00 PM MicroEcon Page 1
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Sheet1 Page 2 Pure Capitalism (6 characteristics)-rewards effieciency, and if you fail there is nothing to fall back on 1 Private Property i. Important b/c incentives 2 Freedom of Enterprise and Choice i. Consumer sovreignty 3 Motive i. Firms: Profit ii. Individuals: Self Interest 4 Competition i. Many Buyers and Sellers ii. Freedom of Entry and Exit (Fail) 1) If no one fails we would become less and less efficient iii. Adequate Information 5
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Sheet1 Page 3 Markets and Prices 6 Limited Gov't i. Sets Ground Rules 1) w/out Govt = anarchy ii. Market Failure 1) Capitalism needs Public Goods Laissezifaire Capitalism -in late 19th century, (w/e market does is Right and w/e govt does is Not Right) lack of competition Wealth of nations Communism-Only true ones Now: Cuba and N. Korea Command Economy-full blown attempt to abolish Capitalism Russia: Stalin-only full blown try to totally rplace govt i. State Ownership of Means of Production ii. Centralized Planning 1) How many things are going to be made?where put industries? a) Wheres everything come from and how much of everything
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Page 4 2) Everyone comments on plan until it gets all the way to enterprise iii. Motive: Altruism 1) If you produce the 'target ' of the paln u live good life a) This doesn& t work out b/c targets will be set really low so low output b) System Discourages Success/quality (producers donS t want to go over expectations/targets b/c they donS t have to get benifits) c) With only one place producing a certain thing also discourages quality 2) Curroption 3) Underground economy iv. Govt. Dominates
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MicroEconCh.3-partCh.4 - Modern Economics 1. Extensive use...

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