Engels midterm I - Chris Fagan Economics 373 Midterm I...

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Chris Fagan Economics 373 Midterm I Professor Resnick Question I . Socialism vs. Capitalist Competition In a capitalist society there are many forms and ways to go about your day to day business activities . In a competitive market such as the one that was presented to us in class it is easy to see how Engels thought that capitalist competition would constrain the forces of production of the society . When there are numerous companies competing within the same market producing the same good or service, the rate of profit falls because when there are so many different companies competing within the same market their sales are negated because they are al competing for the same amount of consumers . As shown below the capitalist competition this creates within the market creates an obvious negative effect on society . In this table it shows how each company starts out with a capital (C) of $8 and a labor cost of $2 which in turn will result in 2 (#) cars being produced at a value of $12 each, which will then give each company $2 in profit or surplus value (SV) . In turn each company has Rate of Profit of .2, we get this by dividing the surplus value or profit by the sum of the capital and labor, 2/8+2= .2. Then we find each company’s total profit by subtracting the total cost ($10) by the total revenue ($11) and we end up with a total profit of $1, (10-11) .
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(SV/C+V) C V SV W # R of P C+V/UV Rev . Cost Profit GM 8 2 2 12 2 . 2 5 11 10 1 Honda 8 2 2 12 2 . 2 5 11 10 1 Ford 8 2 2 12 2 . 2 5 11 10 1 In the above capitalist competition chart it shows how each company is equal with each other in the market, yet there is still competition because they are all competing within the market for the same amount of consumers instead of having on company to service all the car consumers . In the chart below it will show when one of the companies decides to increase their capital at the beginning in order to sell more cars than the other two and be able to produce more cars at a lower cost, therefore giving them an edge over the other two . (SV/C+V) C V SV W # R of P C+V/UV Rev . Cost Profit GM 8 2 2 12 2 . 2 5 11 10 1 Honda 16 2 2 20 4 . 11 4 . 5 22 18 4 Ford 8 2 2 12 2 . 2 5 11 10 1 So, in an effort to get an edge on the competition Honda increases its initial capital to $16 from $8 . This in turn makes each car they produced worth $20, when you add the capital (C) to the labor (V) and the surplus value (SV) you end up with 16+2+2= 20 . So now Honda can produce 4 (#) cars instead of the previous 2, ending up with a Rate of Profit of .11. So essentially Honda is making more cars and spending more
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money in their initial capital, yet their rate of profit is going down . Yet when you look at Hondas new total profit it is 4, whereas the other two companies are still making a total profit of 1 . This sounds good for Honda but they are actually making less money per car
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Engels midterm I - Chris Fagan Economics 373 Midterm I...

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