Question

Economic systems which focus heavily on private ownership, the profit motive, and little government involvement are called ______________ systems.

Socialist

Traditional

Capitalist

Mixed-enterprise

Answer 1

Marx used the Labor Theory of Value and according to it the value of a commodity is determined by the labor required to produce it. Marx defined the value of a commodity as the Socially necessary labor time required to produce it.

He made understand from where the surplus value arise.

He given the circuit.

M-C- production process- C'- M'.

It means a capitalist goes in the market with money M purchases some means of production (labor, inputs and raw materials for the production) and put it into a process and produces C' which is different from C. He sells C' at M' and earn surplus value which is the difference between M' and M.

Here a capitalist will put his money into the circulation only if M'>M. This is main reason emerging of the capitalist. The surplus value is derived from the unpaid labor.

It means that the capitalist system is kind of private ownership and its main purpose is to maximize profit and there is no government involvement what to produce, how to produce and for whom to produce.

Hence it can be said that Economic systems which focus heavily on private ownership, the profit motive, and little government involvement are called capitalist systems.

Hence option third is the correct answer.