CPE EXAM STUDY GUIDE
Forces of Production - Answers :Factors such as raw materials, labor, technology,
energy, and capital
Relations of Production - Answers :Refers to the human social relationships that
emerge as humans derive value from the conversion of natural resources into material
needs
Characteristics of Capitalism - Answers :The primacy and centrality of markets
Private ownership of the means of production
Profit motive - driven by individuals/capitalists striving for profit
Drive to amass capital - capital accumulation in a competitive market
Existence of wage labor
Reliance on the state as a regulatory agent primarily protecting property rights
Wage Labor - Answers :Where labor becomes dispossessed by the individual and is
made a commodity subject to the price mechanism
3 Necessities Provided by the State(Adam Smith) - Answers :1. National Defense
2. Administration of Justice
3. Public Good
Characteristics of Public Good - Answers :1. Nonrival
2. Non-excludable
Liberal Economics - Answers :A doctrine of principles for managing and organizing a
market economy in order to achieve maximum efficiency, economic growth, and
individual welfare
4 Pillars of Economic Freedom - Answers :1. Rule of Law
2. Government Size
3. Regulatory Efficiency
4. Open Markets
Means Tested - Answers :Demonstrate Need
Formal Political Institutions - Answers :Constitutions, legal system, government
structures, contracts
Informal political institutions - Answers :Markets, hierarchies, property rights, norms,
informal processes
5 Spheres - Which firms must develop relationships to resolve problems - Answers :1.
Industrial Relations
Forces of Production - Answers :Factors such as raw materials, labor, technology,
energy, and capital
Relations of Production - Answers :Refers to the human social relationships that
emerge as humans derive value from the conversion of natural resources into material
needs
Characteristics of Capitalism - Answers :The primacy and centrality of markets
Private ownership of the means of production
Profit motive - driven by individuals/capitalists striving for profit
Drive to amass capital - capital accumulation in a competitive market
Existence of wage labor
Reliance on the state as a regulatory agent primarily protecting property rights
Wage Labor - Answers :Where labor becomes dispossessed by the individual and is
made a commodity subject to the price mechanism
3 Necessities Provided by the State(Adam Smith) - Answers :1. National Defense
2. Administration of Justice
3. Public Good
Characteristics of Public Good - Answers :1. Nonrival
2. Non-excludable
Liberal Economics - Answers :A doctrine of principles for managing and organizing a
market economy in order to achieve maximum efficiency, economic growth, and
individual welfare
4 Pillars of Economic Freedom - Answers :1. Rule of Law
2. Government Size
3. Regulatory Efficiency
4. Open Markets
Means Tested - Answers :Demonstrate Need
Formal Political Institutions - Answers :Constitutions, legal system, government
structures, contracts
Informal political institutions - Answers :Markets, hierarchies, property rights, norms,
informal processes
5 Spheres - Which firms must develop relationships to resolve problems - Answers :1.
Industrial Relations
