Entrepreneurs and investors are allowed to receive all profits (net of taxes) that their firms earn. The rights to profits described here are most likely to occur with:

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Consider the question, which asks about a setup where entrepreneurs and investors are entitled to all profits (net of taxes) from their firms. This phrase points to a particular economic system where private ownership and the return on investments are central.
Option 1: Socialism. In socialist systems, the means of production are typically owned or controlled by the public or the state, and profits are distributed according to planned or collective criteria rather than being exclusively captured by private owners or investors. This makes the statement inconsistent with a system that emphasizes private profit capture by individuals.
Option 2: Communism. In classic communist theory, private profit is largely eliminated and production is organized by the community or state for the collective good. Individual entrepreneurs and investors do not typically receive profits as private rewards. Therefore, this option does not align with the idea of private profit rights described.
Option 3: Mixed Economy. A mixed economy blends private enterprise with significant government involvement and public enterprises. While some profits may accrue to private owners, the defining feature here is not an exclusive right to all profits by entrepreneurs and investors, since government intervention and public sectors exist. The statement’s emphasis on entrepreneurs and investors receiving all profits is not a hallmark of mixed economies.
Option 4: Capitalism. In capitalist systems, private individuals or firms own the means of production, and profits accrue to the owners or investors who bear the risks and reap the rewards. The wording “net of taxes” and “rights to profits described here” aligns closely with capitalism’s core principle of private profit after costs and taxes.
To contrast the options, think about who actually enforces profit rights: socialist and communist models centralize or distribute profits differently, whereas capitalism centers profit ownership in private hands. The mixed economy adds public components that dilute the exclusive claim to all profits by private actors.
In summary, the description given—private entrepreneurs and investors receiving all profits net of taxes from their firms—best matches the hallmark of a capitalist framework, where private ownership and profit incentives drive investment and risk-taking.

MGM101H5 F LEC0101 Quiz #2

Entrepreneurs and investors are allowed to receive all profits (net of taxes) that their firms earn. The rights to profits described here are most likely to occur with:

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