Ethics 2

Question 1

command economy

Answer 1

economic systems based primarily on a government authority making the economic decisions

Question 2

market economy

Answer 2

economic system based primarily on private individuals making the main economic decisions

Question 3

free markets

Answer 3

each individual is able to voluntarily exchange goods with others and to decide what will be done with what he or she owns without interference from government

Question 4

free trade

Answer 4

citizens may freely trade goods with the citizens of other nations without the interference of tariffs, quotas, or other government limits on the goods citizens may buy from or sell to foreign citizens

Question 5

Locke’s State of Nature

Answer 5

-all persons are free and equal -each person owns his body and labor, and whatever he mixes his own labor into -people’s enjoyment of life, liberty, and property are unsafe and insecure -people agree to form a government to protect and preserve their right to life, liberty, and property

Question 6

criticisms on Locke’s view

Answer 6

-Locke does not demonstrate that individuals have “natural” rights to life, liberty, and property -Locke’s natural rights are negative rights and he does not show these override conflicting positive rights -Locke’s rights imply that markets should be free, but free markets can be unjust

Question 7

Adam Smith

Answer 7

-market competition ensures the pursuit of self-interest in markets and advances the public’s welfare -government interference in markets lowers the public’s welfare by creating shortages or surpluses -private ownership leads to better care and use of resources than common ownership

Question 8

Hayek and von Mises

Answer 8

governments should not interfere in markets because they cannot have enough information to allocate resources as efficiently as free markets

Question 9

criticisms of free market and utility

Answer 9

-rests on unrealistic assumption that there are no monopoly companies -falsely assumes that all costs of manufacturing are paid by manufacturer, which ignores the costs of pollution -falsely assumes human beings are motivated only by a self-interested desire for profit -some government planning and regulation of market is possible amd desirable

Question 10

Keynes’ criticism of Smith

Answer 10

-Smith wrongly assumes demand is always enough to absorb the supply of goods -if households forego spending, demand can be less than supply, leading to cutbacks, unemployment, and economic depression -government spending can make up for such shortfalls in household spending, so government should intervene in markets -Keynes’ views were challenged when government spending did not cure high unemployment but created inflation

Question 11

tradition-based societies

Answer 11

rely on traditional communal roles and customs to carry out basic economic tasks

Question 12

Social Darwinism

Answer 12

belief that economic competition produces human progress

Question 13

views of Herbert Spencer

Answer 13

-evolution operates in society when economic competition ensures the fittest survive and the unfit do not, which improves the human race -if government intervenes in the economy to shield people from competition, the unfit survive and the human race declines, so government should not do so -assumes those who survive in business are “better” people than those who do not

Question 14

criticisms of free trade and utility

Answer 14

-ignores the easy movement of capital by companies -falsely assumes that a country’s production costs are constant -ignores the influence of international rule setters

Question 15

Karl Marx’s criticizing of market and free trade

Answer 15

-capitalist systems offer only two sources of income: sale of one’s own labor and ownership of the means of production (i.e. buildings, machinery, land, and raw materials) -capitalism and its private property system creates alienation among workers

Question 16

Marx on alienation

Answer 16

-in capitalism, workers become alienated when they lose control of their own life activities and the ability to fulfill their true human needs -capitalism alienates workers from their own productive work, the products of their work, their relationships with each other, and from themselves -alienation also occurs when the value of everything is seen in terms of its market price

Question 17

Marx and private property

Answer 17

-private ownership of the means of production is the source of the worker’s loss of control over work, products, relationships, and self -productive property should serve the needs of all and should not be privately owned, but owned by everyone

Question 18

Marx’s historical materialism

Answer 18

-the methods a society uses to produce its goods determine how that society organizes its workers -the way a society organizes its workers determines its social classes -a society’s ruling social class controls society’s government and ideologies and uses these to advance its own interests and control the working classes

Question 19

Criticism of Marx

Answer 19

-Marx’s claims that capitalism is unjust are unprovable -justice requires free markets -the benefits of private property and free markets are more important than equality -free markets can encourage community instead of causing alienation -immiseration of workers has not occurred; instead their condition has improved

Question 20

price and quantity move to equilibrium when…

Answer 20

-if price rises above equilibrium, surplus appears and drives the price back down -if price falls below equilibrium, shortage appears and drives price up to equilibrium -if quantity is less than equilibrium, profits rise, attracting sellers who increase quantity to equilibrium -if quantity is more than equilibrium, prices fall, driving sellers out which lowers quantity to equilibrium

Question 21

utility in perfectly competitive markets

Answer 21

-prices in the system of perfectly competitive markets attract resources when demand is high and drives them away when demand is low, so resources are allocated

Question 22

characteristics of monopoly markets

Answer 22

-one dominant seller controls all or most of the market’s product, and there are barriers to entry that keep other companies out -seller has the power to set quantity and price of its products on the market -seller can extract monopoly profit by producing less than equilibrium quantity and setting price below demand curve but high above supply curve -high entry barriers keep other competitors from bringing more product to the market

Question 23

ethical weaknesses of monopolies

Answer 23

-violates capitalist justice -violates utilitarianism -violates negative rights (forcing other companies to stay out of market, letting monopolist force buyers to purchase goods they do not want, letting monopolist make price and quantity decisions that consumer is forced to accept

Question 24

oligopolistic markets

Answer 24

• major industrial markets are dominated by only a few firms
• oligopolistic markets are “imperfectly competitive” because they lie between the two extremes of the perfectly competitive and monopolistic markets
• unethical practices: price-fixing, manipulation of supply, market allocation, bid rigging, exclusive dealing arrangements, tying arrangements, retail price maintenance agreements, predatory price discrimination

Question 25

the fraud triangle

Answer 25

-the pressures or strong incentives to do wrong, such as organizational pressure, peer pressure, company needs, personal incentives -the opportunity to do wrong, which includes the ability to carry out the wrongdoing, being presented with circumstances that allow it, low risk of detection -the ability to rationalize one’s action by framing as morally justified

Question 26

main views on oligopoly power

Answer 26

• do-nothing view- do nothing since power of oligopolies is limited by competition between industries and by countervailing power of large groups; oligopolies are competitive and big US companies are good international competitors
• antitrust view-large monopoly and oligopoly firms are anticompetitive and should be broken into small companies
• regulation view-big companies are beneficial but need to be restrained by government regulation