Questions what is the main features of the socialist economy?


Disadvantages of socialism?



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Final exam questions and answers

Disadvantages of socialism?

Key words: tax burden, property ownership, welfare, innovation opportunities

Lack of incentives. If an economy has high rates of tax burden, it could cause disincentives to work and setting up business. Entrepreneurs may feel that if the government is taking a high percentage of their profits, they would prefer not to take the risk or work abroad.

Lack of economic freedom. While property ownership is regulated by society, it takes away people’s freedom to enterprise, which in turn takes away people’s free choice of occupation.

Welfare state can cause disincentives. If a welfare state is too generous, it is argued it may create a disincentive to get a job and therefore it can reduce the labor force and individual effort.

Lack of competitiveness and innovation. Socialism does not reward entrepreneurial ventures or competitiveness. Consequently, a socialistic system does not encourage innovation opportunities.


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