Question

What is capitalism? Is bankruptcy important to capitalism? When governments provide bailout funds for firms that are having financial troubles, would you view this as capitalism? What is the single most important reason as to why firms go bankrupt: 1) Debt, 2) Competition, 3) Saturated Market, or 4) other?

Answer 1

ANS: Capitalism refers to an economic & political system in which a country trades & industry are controlled by the private owners. In this scenario, wealthy people (Individual capitalist) who are having large amount of capital invested in the business gets benefits in form of increased profits & wealth maximisation.

Bankruptcy is a legal proceeding upon a person or business entities who are unable to pay-off their outstanding debts.

Yes, bankruptcy important to capitalism, as Bankruptcy is a patterned way to give a over-burdened debtor to make a fresh start. Which ultimately enourage the presence of capitalist individual to provide them a financial assistance in form of loan & charge a high rate of Interest fro that debtor.

Bailout is a kind of Financial assistance where a govenment provides resources or money to sick industries for their survival. Bailout funds are generally provided when a company is suffering from liquidity crisis & are unable to pay their outside debt & statutory obligations, so these funds help them to survive & helps them to recover financially.

The single most important reason as to why firms go bankrupt is Saturated Market (Option 3).

market saturation is a point where a specific market is no longer providing a new demand to an Individual firm, In this entire market has no demand.Due to which company may not be able to sell their products leading to increase in debts & situation of hardship of money to pay-off the debts, ultimately giving rise to bankruptcy.