Question

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

Public enterprise, a characteristic of command economies, refers to businesses and industries owned, operated, and controlled by the government. In contrast to private enterprise in market-oriented economies, public enterprises focus on social welfare and efficient resource allocation rather than solely on profit-maximization.

Step-by-step solution

Understanding market-oriented economies and command economies

Market-oriented economies and command economies are the two broad categories of economic systems. In a market-oriented economy, also known as a capitalist economy, decisions regarding production, distribution, and consumption of goods and services are primarily made by individuals, firms, and markets. Major examples of market-oriented economies include the United States, Germany, and Japan. Private enterprise, or private businesses operated and owned by individuals, is a primary characteristic of these economies. In contrast, command economies, also known as planned or socialist economies, the government controls and directs all aspects of production, distribution, and consumption of goods and services. Some examples of countries historically adopting command economies include the Soviet Union, Cuba, and North Korea.

Understanding private enterprise

Private enterprise is a characteristic of market-oriented economies. In such economies, businesses and industries are owned and operated by individuals or corporations driven by the goal of making profits. Decisions relating to production, distribution, and pricing are made in response to consumer preferences and market conditions. Private enterprise primarily aims at profit-maximization and is an essential part of market-driven economies.

Defining public enterprise

As a counterpart to private enterprise in market-oriented economies, public enterprise is a characteristic of command economies. Public enterprises are businesses and industries owned, operated, and controlled by the government, rather than private individuals or companies. Decisions relating to production, distribution, and pricing are made centrally by the government or its planning agencies. The primary goal of public enterprises is to achieve social welfare and efficient allocation of resources, rather than solely focusing on profit-maximization. In conclusion, public enterprise is an essential part of command economies where businesses and industries, as well as economic decisions, are owned and controlled by the government, focusing on social welfare and resource allocation as a primary goal.