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The Chicago School of economics gained ascendancy in the

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The Chicago School of economics gained ascendancy in the [#permalink] New post 07 May 2009, 00:27
The Chicago School of economics gained ascendancy in the 1950s and became the prevailing way of thinking about capitalist economics, first in the United States and eventually in many Western countries. A dominant subset of “Neoclassical economics,” the Chicago School fine-tuned many of the fundamentals of the larger movement and articulated tenets now generally taken for granted in economic thought.

A basic principle of Neoclassical economics is the concept of utility, or the assertion that a correct economic decision is one that yields “the greatest good for the greatest number.” Neoclassical economics vociferously defends a laissez-faire, or “hands off,” approach to government regulation. According to Neoclassical theory, in the absence of state interference, individual participants in the market will make rational economic decisions that maximize their satisfaction. For individuals, the principle of utility translates into buying quality goods at the lowest possible price; for companies, it means making decisions that will maximize profits. The interplay of free market forces, according to Neoclassical economists, will result in greater good – in the form of high quality products and services – for a greater number of people.

The Chicago School accepts the principles of utility and laissez-faire regulation, but tailors its understanding of these terms to focus on the related principle of “efficiency.” For Chicago School thinkers, “efficiency” subsumes Neoclassical thought on the mechanisms of utility, which concentrates on individuals making individual rational decisions, into a more sophisticated awareness of the balance between individual decisions and production. The chief cause of inefficiency for Chicago School thinkers is government regulation, which prevents the free interplay of market forces. In an economy unencumbered by state interference, not only are individuals and companies free to maximize their satisfaction, but production itself is likely to become more efficient by producing the highest quality goods at the lowest possible price.

The author of the passage most likely states that greater good comes in the form of high quality products and services for which of the following reasons?

1. To underscore the fact that Neoclassical economists are more concerned with the greater good than other types of economists.
2.To remind readers that, for the principle of utility to truly apply, goods and services must be put to appropriate use.
3. To emphasize the fact that products and services are good, but high quality products and services are better.
4. To distinguish between economic good (quality products and services) and economic evil (lack of quality products and services).
5. To make clear an implied distinction between moral good (virtue) and economic good (quality products and services).
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Re: RC-Neoclassical theory [#permalink] New post 07 May 2009, 11:08
Using POE, I will go with C.

A. Naoeconomists are not concerned with more goods.
B. Passage does not remind readers of anything.
D. Scope of passage does not include economic evil.
E. Scope of passage does not include moral good.
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Re: RC-Neoclassical theory [#permalink] New post 07 May 2009, 22:23
IMO B.
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Re: RC-Neoclassical theory [#permalink] New post 13 May 2009, 12:13
i will go with B
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Re: The Chicago School of economics gained ascendancy in the [#permalink] New post 02 Dec 2011, 05:05
Can anyone explain this question?
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Re: The Chicago School of economics gained ascendancy in the [#permalink] New post 06 Jul 2015, 21:33
I picked C, but the OA is E. I can not understand the OE also. Here is the explanation. Could anyone explain, please.
=> The relationship of laissez-faire with the principle of Utility is being discussed in the second paragraph. The line in question is making a connection between the benefits of limited government regulation and achieving the goal of principle of Utility. This sentence also clarifies the possible misunderstanding in the meaning of the word "good".
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Re: The Chicago School of economics gained ascendancy in the [#permalink] New post 07 Jul 2015, 17:59
It should be B ... what is the source?
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Re: The Chicago School of economics gained ascendancy in the [#permalink] New post 08 Jul 2015, 05:21
I think the answer has to be E. We can look at it in a way that the author is talking about the greater good of the economy
Re: The Chicago School of economics gained ascendancy in the   [#permalink] 08 Jul 2015, 05:21
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