Answer to Question 1
False
Answer to Question 2
Capitalism is an economic system characterized by private ownership of the means of
production, from which personal profits can be derived through market competition and
without government intervention. Ideal capitalism has four distinctive features: (1)
Private ownership of the means of productioncapitalis t economies are based on the
right of individuals to own income-producing property, such as land, water, mines, and
factories, and the right to buy people's labor. In early monopoly capitalism (1890
1940), most ownership shifted from individuals to huge corporationsorganiz ations that
have legal powers, such as the ability to enter into contracts and buy and sell property,
separate from their individual owners. In advanced monopoly capitalism (1940
present), ownership and control of major industrial and business sectors have become
increasingly concentrated and many corporations have become more global in scope.
(2) Pursuit of personal profita tenet of capitalism is the belief that people are free to
maximize their individual gain through personal profit. In early monopoly capitalism,
some stockholders derived massive profits from companies that held near monopolies
on specific goods and services (such as American Tobacco Company). In advanced
(late) monopoly capitalism, profits have become even more concentrated (such as Nike
or Dell). (3) In theory, competition acts as a balance to excessive profits. When
producers vie with one another for customers, they must be able to offer innovative
goods and services at competitive prices. In early monopoly capitalism, competition
was diminished by increasing concentration within a particular industry (such as
Standard Oil Company). An oligopoly exists when several companies overwhelmingly
control an entire industry (such as the music industry). A shared monopoly exists when
four or fewer companies supply 50 percent or more of a particular market (such the
Big Three U.S. automobile manufacturers). Corporations with control both within
and across industries are often formed by a series of mergers and acquisitions across
industries. These corporations are referred to as conglomeratescombin ations of
businesses in different commercial areas, all of which are owned by one holding
company (such as Time Warner). Competition is also reduced over the long run by
interlocking corporate directoratesmembers of the board of directors of one
corporation who also sit on the board(s) of other corporations. (4) Ideally, capitalism
works best without government intervention in the marketplace. Overall, most
corporations have gained much more than they have lost as a result of government
involvement in the economy.
Answer to Question 3
b