Explain how the great recession illustrated one of the weaknesses of a free enterprise economy
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The advantage of a free enterprise economy is that it maximizes profits.
The disadvantage of a free enterprise economy is that - well - it maximizes profits above everything else!
For example, Free Enterprise created AT&T in the U.S. Once it built all the network infrastructures, everybody wanted to be on AT&T. No consumer wanted to sign on to a competitor with relatively limited network reach, so nobody could compete with AT&T. The result was that the pricing was so arbitrary and the customer service was so bad it became a national parody. The government had to come in and broke it through Anti-Trust laws so that it could introduce competition and lower prices for everyone. That's an example where the Government actively acted against free enterprise.
Another example is polio vaccine. In a free-enterprise economy, the vaccine maker can file a patent application and then charge $100,000 per vaccine. You get it, you don't have to worry about polio again. You don't, you may end up paralyzed the rest of your life. In fact, the vaccine maker would rather have a certainly percent of population going around paralyzed as living advertisement for their product, right? You will rather take on debt to get the vaccine for yourself and your family than go without it. But the government has an incentive to make sure everybody gets vaccinated, so it stepped in, set the price so that vaccine makers don't lose money on it, but definitely not make so much profit from it.
A truly free economy means that people will be working on finding a cure for cancer, AND selling guns and warships to warring nations. Both can make you a lot of money!
The disadvantage of a free enterprise economy is that - well - it maximizes profits above everything else!
For example, Free Enterprise created AT&T in the U.S. Once it built all the network infrastructures, everybody wanted to be on AT&T. No consumer wanted to sign on to a competitor with relatively limited network reach, so nobody could compete with AT&T. The result was that the pricing was so arbitrary and the customer service was so bad it became a national parody. The government had to come in and broke it through Anti-Trust laws so that it could introduce competition and lower prices for everyone. That's an example where the Government actively acted against free enterprise.
Another example is polio vaccine. In a free-enterprise economy, the vaccine maker can file a patent application and then charge $100,000 per vaccine. You get it, you don't have to worry about polio again. You don't, you may end up paralyzed the rest of your life. In fact, the vaccine maker would rather have a certainly percent of population going around paralyzed as living advertisement for their product, right? You will rather take on debt to get the vaccine for yourself and your family than go without it. But the government has an incentive to make sure everybody gets vaccinated, so it stepped in, set the price so that vaccine makers don't lose money on it, but definitely not make so much profit from it.
A truly free economy means that people will be working on finding a cure for cancer, AND selling guns and warships to warring nations. Both can make you a lot of money!
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