Free Market and Property Rights

Question 1

Free Market

Answer 1

Prices are set by supply and demand, companies and products privately owned

Question 2

In a free market, transactions are driven by …

Answer 2

Supply and Demand

Question 3

Equilibrium price

Answer 3

The point where the supply and demand curves intersect

Question 4

Necessary conditions for a free market

Answer 4

1. Large number of buyers/seller
2. Market competition - no monopolies
3. Everyone needs perfect information about current/future prices
4. All agents behave in their own best interest
5. Prices reflect costs of production and consumption
6. Inputs being supplied are individually owned and divisible

Question 5

Pros of free market

Answer 5

Efficient method for allocating limited resource
Communicates scarcity of a good
Incentivize productive use of resources

Question 6

Invisible hand

Answer 6

Individuals’ efforts to pursue their own best interest may result in benefit for society in a free market

Question 7

Ownership implies these rights

Answer 7

1. Access + Withdrawal - to use/enjoy
2. Exclusion - control who can use
3. Management - control use patterns
4. Alienation - free to sell, rent, dispose

Question 8

Private property

Answer 8

Goods and services owned by individuals/corporations

Question 9

Community owned property

Answer 9

Owned by a group of people with well defined membership

Question 10

Public or state owned

Answer 10

Owned by government on behalf of citizens, usually in public interest

Question 11

Open access

Answer 11

Goods of value where access cannot be controlled - right to capture applies

Question 12

Right to capture

Answer 12

Whoever captures a resource has the right to own/sell it

Question 13

Common heritage of humanity

Answer 13

Should be held in trust for future generations - should not be unilaterally exploited

Question 14

Excludability

Answer 14

How easy it is to prevent people who haven’t paid for a resource from using it