Unformatted text preview: x believed that capitalists, in pursuing
their self-interests, actually exploited the
workers. How does this happen? Defining Terms
a. economic system
b. free enterprise
d. traditional economy
e. economic plan
f. surplus value Marx argued in his labor theory of value
that all value in produced goods comes from
labor. The value of any item, he said, is
determined by the necessary labor time
needed to produce that item. For example, if
it takes 5 hours of labor time to produce a
chair and 10 hours to produce a table, then
the table is twice as valuable as the chair.
Marx believed that the owners of factories
and businesses exploited the workers by paying them far less than they were worth. For
example, suppose a worker produced $100 a
day worth of value for the factory owner but
was only paid $20. The difference between the
total value of production ($100) and the
wages paid to the worker ($20) is what Marx
called surplus value ($80). According to
Marx this surplus should go to the worker, but
instead is stolen by the capitalist for himself. Ideas That Changed the World
The ideas of both Smith and Marx have
been with us for many years. Smith’s ideas
compose much of the foundation upon
which free enterprise rests, while Marx’s
ideas provide much of the foundation for
som Their ideas have changed the
world, and will probably continue to have a
major impact on the world for years to come. som as each relates
to private property?
4. Are all mixed economies
the same? Explain your
5. What is Smith’s position
6. Explain Marx’s labor theory of value. Reviewing Facts and
Concepts 40 Critical Thinking 2. What are the three economic questions every
society must answer?
3. What is the difference
between free enterprise
(or capitalism) and 7. Why do you think that
most economies are
instead of purely capitalist or purely sot
economies? Chapter 2 Economic Systems and the Global Economy Applying Economic
8. Choose a current economic issue or policy
measure and then contrast the way a proponent of capitalism would
discuss it versus how a
proponent of som
would discuss it. 02 (030-053) EMC Chap 02 11/17/05 4:13 PM Page 41 Focus Questions
What is globalization?
What are the causes of globalization?
What evidence indicates that globalization is
What are the benefits of globalization?
What are the costs of globalization?
Is the trend toward globalization likely to
continue? Globalization Key Terms
offshoring What Is Globalization?
From the 1950s through the 1980s, it was
common to hear people talk about a capitalist or free enterprise country, and about a
sot or communist country. It was as if
each country in the world was definitely one
or the other. It was also the case that for the
most part these countries only associated
(politically and economically) with their
Things have changed. Few countries can
be easily labeled “ca...
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This document was uploaded on 01/16/2014.
- Winter '14