Chapter 1: Problem 8

The chapter defines private enterprise as a characteristic of market-oriented economies. What would public enterprise be? Hint: It is a characteristic of command economies.

Short Answer

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Public enterprise refers to business activities owned, controlled, and operated by the government or a centralized authority, with objectives such as providing public goods and services, ensuring equitable distribution, and promoting social welfare. In command economies, public enterprises play a significant role, as they are the primary means for the government to exercise control over the production and distribution of goods and services, achieving the central economic plan and policy objectives.

Step by step solution

Define Private Enterprise

Private enterprise refers to business activities that are owned, controlled, and operated by private individuals or organizations, with the primary goal of generating profit. In market-oriented economies, private enterprises play a significant role, as they help maintain competition within the marketplace and are driven by market forces such as supply and demand.

Define Command Economies

Command economies, also known as centrally planned or controlled economies, are economic systems in which the government or a centralized authority controls all major aspects of the economy. This includes determining what goods and services to produce, how to allocate resources, and setting prices for goods and services, instead of relying on the market forces of supply and demand, as in market-oriented economies.

Define Public Enterprise

Public enterprise, as opposed to private enterprise, refers to the business activities that are owned, controlled, and operated by the government or a centralized authority. The primary goal of public enterprises may vary, but some common objectives include providing public goods and services, ensuring equitable distribution of goods and services, and promoting social welfare.

Relate Public Enterprise to Command Economies

In command economies, public enterprises play a significant role, as they are the primary means through which the government or centralized authority exercises control over the production and distribution of goods and services. Public enterprises are widespread in command economies, where the government may operate businesses in various industries like transportation, utilities, and manufacturing. In such economies, public enterprises help government authorities achieve the central economic plan and policy objectives, as opposed to relying on market forces like supply and demand.

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