In 2-3 paragraphs, respond to the following. Your initial post should be substantive and be supported by course concepts. Your initial post is due by Wednesday to allow other students to respond.
To what extent should government influence the economy of a democracy such as the United States? Support your position with concepts from the readings.
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17.1 How Businesses Raise Financial Capital - Principles of Microeconomics 2e | OpenStax Skip to Content Principles of Microeconomics 2e17.1 How Businesses Raise Financial Capital Principles of Microeconomics 2e17.1 How Businesses Raise Financial Capital Table of contents My highlightsPrint Table of contents Preface 1 Welcome to Economics! Introduction 1.1 What Is Economics, and Why Is It Important? 1.2 Microeconomics and Macroeconomics 1.3 How Economists Use Theories and Models to Understand Economic Issues 1.4 How To Organize Economies: An Overview of Economic Systems Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions 2 Choice in a World of Scarcity Introduction to Choice in a World of Scarcity 2.1 How Individuals Make Choices Based on Their Budget Constraint 2.2 The Production Possibilities Frontier and Social Choices 2.3 Confronting Objections to the Economic Approach Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 3 Demand and Supply Introduction to Demand and Supply 3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services 3.2 Shifts in Demand and Supply for Goods and Services 3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process 3.4 Price Ceilings and Price Floors 3.5 Demand, Supply, and Efficiency Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 4 Labor and Financial Markets Introduction to Labor and Financial Markets 4.1 Demand and Supply at Work in Labor Markets 4.2 Demand and Supply in Financial Markets 4.3 The Market System as an Efficient Mechanism for Information Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 5 Elasticity Introduction to Elasticity 5.1 Price Elasticity of Demand and Price Elasticity of Supply 5.2 Polar Cases of Elasticity and Constant Elasticity 5.3 Elasticity and Pricing 5.4 Elasticity in Areas Other Than Price Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 6 Consumer Choices Introduction to Consumer Choices 6.1 Consumption Choices 6.2 How Changes in Income and Prices Affect Consumption Choices 6.3 Behavioral Economics: An Alternative Framework for Consumer Choice Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 7 Production, Costs, and Industry Structure Introduction to Production, Costs, and Industry Structure 7.1 Explicit and Implicit Costs, and Accounting and Economic Profit 7.2 Production in the Short Run 7.3 Costs in the Short Run 7.4 Production in the Long Run 7.5 Costs in the Long Run Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 8 Perfect Competition Introduction to Perfect Competition 8.1 Perfect Competition and Why It Matters 8.2 How Perfectly Competitive Firms Make Output Decisions 8.3 Entry and Exit Decisions in the Long Run 8.4 Efficiency in Perfectly Competitive Markets Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 9 Monopoly Introduction to a Monopoly 9.1 How Monopolies Form: Barriers to Entry 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 10 Monopolistic Competition and Oligopoly Introduction to Monopolistic Competition and Oligopoly 10.1 Monopolistic Competition 10.2 Oligopoly Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 11 Monopoly and Antitrust Policy Introduction to Monopoly and Antitrust Policy 11.1 Corporate Mergers 11.2 Regulating Anticompetitive Behavior 11.3 Regulating Natural Monopolies 11.4 The Great Deregulation Experiment Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 12 Environmental Protection and Negative Externalities Introduction to Environmental Protection and Negative Externalities 12.1 The Economics of Pollution 12.2 Command-and-Control Regulation 12.3 Market-Oriented Environmental Tools 12.4 The Benefits and Costs of U.S. Environmental Laws 12.5 International Environmental Issues 12.6 The Tradeoff between Economic Output and Environmental Protection Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 13 Positive Externalities and Public Goods Introduction to Positive Externalities and Public Goods 13.1 Why the Private Sector Underinvests in Innovation 13.2 How Governments Can Encourage Innovation 13.3 Public Goods Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 14 Labor Markets and Income Introduction to Labor Markets and Income 14.1 The Theory of Labor Markets 14.2 Wages and Employment in an Imperfectly Competitive Labor Market 14.3 Market Power on the Supply Side of Labor Markets: Unions 14.4 Bilateral Monopoly 14.5 Employment Discrimination 14.6 Immigration Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions 15 Poverty and Economic Inequality Introduction to Poverty and Economic Inequality 15.1 Drawing the Poverty Line 15.2 The Poverty Trap 15.3 The Safety Net 15.4 Income Inequality: Measurement and Causes 15.5 Government Policies to Reduce Income Inequality Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 16 Information, Risk, and Insurance Introduction to Information, Risk, and Insurance 16.1 The Problem of Imperfect Information and Asymmetric Information 16.2 Insurance and Imperfect Information Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 17 Financial Markets Introduction to Financial Markets 17.1 How Businesses Raise Financial Capital 17.2 How Households Supply Financial Capital 17.3 How to Accumulate Personal Wealth Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 18 Public Economy Introduction to Public Economy 18.1 Voter Participation and Costs of Elections 18.2 Special Interest Politics 18.3 Flaws in the Democratic System of Government Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 19 International Trade Introduction to International Trade 19.1 Absolute and Comparative Advantage 19.2 What Happens When a Country Has an Absolute Advantage in All Goods 19.3 Intra-industry Trade between Similar Economies 19.4 The Benefits of Reducing Barriers to International Trade Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems 20 Globalization and Protectionism Introduction to Globalization and Protectionism 20.1 Protectionism: An Indirect Subsidy from Consumers to Producers 20.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions 20.3 Arguments in Support of Restricting Imports 20.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally 20.5 The Tradeoffs of Trade Policy Key Terms Key Concepts and Summary Self-Check Questions Review Questions Critical Thinking Questions Problems A | The Use of Mathematics in Principles of Economics B | Indifference Curves C | Present Discounted Value Answer Key Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Chapter 17 Chapter 18 Chapter 19 Chapter 20 References Index By the end of this section, you will be able to: Describe financial capital and how it relates to profits Discuss the purpose and process of borrowing, bonds, and corporate stock Explain how firms choose between sources of financial capital Firms often make decisions that involve spending money in the present and expecting to earn profits in the future. Examples include when a firm buys a machine that will last 10 years, or builds a new plant that will last for 30 years, or starts a research and development project. Firms can raise the financial capital they need to pay for such projects in four main ways: (1) from early-stage investors; (2) by reinvesting profits; (3) by borrowing through banks or bonds; and (4) by selling stock. When business owners choose financial capital sources, they also choose how to pay for them. Early-Stage Financial Capital Firms that are just beginning often have an idea or a prototype for a product or service to sell, but few customers, or even no customers at all, and thus are not earning profits. Such firms face a difficult problem when it comes to raising financial capital: How can a firm that has not yet demonstrated any ability to earn profits pay a rate of return to financial investors? For many small businesses, the original source of money is the business owner. Someone who decides to start a restaurant or a gas station, for instance, might cover the startup costs by dipping into his or her own bank account, or by borrowing money (perhaps using a home as collateral). Alternatively, many cities have a network of well-to-do individuals, known as “angel investors,” who will put their own money into small new companies at an early development stage, in exchange for owning some portion of the firm. Venture capital firms make financial investments in new companies that are still relatively small in size, but that have potential to grow substantially. These firms gather money from a variety of individual or institutional investors, including banks, institutions like college endowments, insurance companies that hold financial reserves, and corporate pension funds. Venture capital firms do more than just supply money to small startups. They also provide advice on potential products, customers, and key employees. Typically, a venture capital fund invests in a number of firms, and then investors in that fund receive returns according to how the fund as a whole performs. The amount of money invested in venture capital fluctuates substantially from year to year: as one example, venture capital firms invested more than $48.3 billion in 2014, according to the National Venture Capital Association. All early-stage investors realize that the majority of small startup businesses will never hit it big; many of them will go out of business within a few months or years. They also know that getting in on the ground floor of a few huge successes like a Netflix or an Amazon.com can make up for multiple failures. Therefore, early-stage investors are willing to take large risks in order to position themselves to gain substantial returns on their investment. Profits as a Source of Financial Capital If firms are earning profits (their revenues are greater than costs), they can choose to reinvest some of these profits in equipment, structures, and research and development. For many established companies, reinvesting their own profits is one primary source of financial capital. Companies and firms just getting started may have numerous attractive investment opportunities, but few current profits to invest. Even large firms can experience a year or two of earning low profits or even suffering losses, but unless the firm can find a steady and reliable financial capital source so that it can continue making real investments in tough times, the firm may not survive until better times arrive. Firms often need to find financial capital sources other than profits. Borrowing: Banks and Bonds When a firm has a record of at least earning significant revenues,