Questions 7 + 2
You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?
$10
Which economic system is the most common?
A mixed economy
The key role of institutions is to:
reduce uncertainty.
A buyer's willingness to pay is
that buyer's maximum amount he is willing to pay for a good
Suppose that the price of a new bicycle is $300. Sue values a new bicycle at $400. It costs $200 for the seller to produce the new bicycle. What is the value of total surplus if Sue buys a new bike?
$200
Intellectual property rights (IPR) covers the following: - All of these - Trademarks - Copyrights - Patents
All of these
Which of the following factors do NOT drive economic development in different countries? - Political system - Geography - Institutions - Culture
Political system
Which of the following statement is true about market economy?
The government only performs functions the private sector cannot perform
Which of the following statement is true about market economy?
The government takes a hands-off approach in market economy.
What is a cognitive pillar?
The internalized values and beliefs that guide behavior
Which of the following will cause an increase in producer surplus?
The price of a substitute increases
Which of the following statements regarding totalitarianism is true?
Theocratic totalitarianism refers to the monopolization of political power in the hands of one religious party or group.
Producer surplus is the area
above the supply curve and below the price.
Consumer surplus is the area
below the demand curve and above the price.
Total surplus is the area
below the demand curve and above the supply curve.
The owners of a chain of drycleaners would like to sell the business so they falsify the firm's accounting and other financial documents to make it look more profitable than it actually has been. They are engaging in:
opportunism
If a market is efficient, then
the market allocates buyers to the sellers who can produce the good at least cost.
If a market is efficient, then
the market allocates output to the buyers who value it the most.
The seller's cost of production is
the minimum amount the seller is willing to accept for a good.
If a buyer's willingness to pay for a new Honda is $30,000 and she is able to actually buy it for $28,000, her consumer surplus is
$2,000
A seller's opportunity cost measures the
value of everything she must give up to produce a good.
In which of the following ways do formal institutions regulate trade?
By imposing laws that make certain trades unacceptable
Which of the following statement is true about civil law?
Civil law has less flexibility than common law because judges only have the power to apply the law.
Which of the following statement is true about civil law?
Civil law has statutes and codes to guide judges.
Which of these statements regarding civil law is true?
Civil law is not practiced in Saudi Arabia, Iran, or the United Arab Emirates.
Which of the following statement is true about civil law?
Civil law was derived from Roman law and strengthened by Napoleon's France.
Which of the following statements regarding totalitarianism is true?
Communist totalitarianism centers on a communist party, while right-wing totalitarianism is characterized by its intense hatred of communism.
Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?
Consumer surplus decreases.
You are a professional songwriter. The songs you have written--your intellectual property--are protected by what type of rights?
Copyrights
Formal institutions include all of the following EXCEPT: - Laws - Cultures - Rules - Regulations
Cultures
Which of the following is true of private ownership?
Firms are established by entrepreneurs, owners, and investors.
_____ is a long-standing legal doctrine that excuses firms from living up to the terms of a deal in the event of natural disasters or other calamities.
Force majeure
Which of the following is a proposition of the institution-based view of global business?
Formal and informal institutions combine to govern firm behavior.
Which of the following is a proposition of the institution-based view of global business?
In situations where formal constraints are unclear, informal constraints will play a larger role in reducing uncertainty.
Which statement about the stability of institutions is accurate?
Institutions are dynamic, which creates both huge challenges and tremendous opportunities for domestic and international firms.
In what ways do institutions influence individual and firm behaviors?
Institutions reduce uncertainty by influencing the decision-making process of both individuals and firms by signaling what conduct is legitimate and acceptable and what is not.
Which of the following is a feature of right-wing totalitarianism?
It does not allow room for political freedom.
Which of the following is true of the common law system?
It has spread to all English-speaking countries and their (former) colonies.
Which of the following is true of private ownership?
It tends to force firms into liquidation due to high competition.
Which of the following is included in formal institutions?
Legal systems
What are the two core propositions behind the institution-based view of global business?
Managers and firms pursue their interests and make choices rationally in situations; and where formal constraints are unclear or fail, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms.
Which of the following is a proposition of the institution-based view of global business?
Managers and firms rationally pursue their interests and make choices within the formal and informal constraints.
Which of the following statement is true about market economy?
Market economy is characterized by the "invisible hand" of market forces.
For which of the following types of economies would the factors of production depend on the relative distribution of market forces versus command forces?
Mixed economy
Which of the following economies would be characterized as having a laissez faire policy?
Pure market economy
Moral hazard is defined as:
Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions.
Which country follows theocratic law?
Saudi Arabia
_____ are exclusive legal rights of firms to use specific names, brands, and designs to differentiate their products from others.
Trademarks
Which of the following statements regarding totalitarianism is true?
Tribal totalitarianism refers to one tribe or ethnic group (which may or may not be the majority of the population) monopolizing political power and oppressing other tribes or ethnic groups.
Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market?
Two vases will be sold, and consumer surplus is $5
Which of the following is an example of an intellectual property?
Website
Which of the following is a proposition of the institution-based view?
When formal constraints are unclear, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms.
Which statement best describes the significance of informal constraints?
While formal and informal institutions combine to govern firm behavior, informal constraints play a larger role in reducing uncertainty and providing constancy for managers and firms in situations where formal constraints are unclear or fail, even in developed economies.
If you have the right to start your own business, it is a sure sign you are living in:
a democracy.
Democracy is:
a political system in which citizens elect representatives to govern the country.
In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should
allow the market to seek equilibrium on its own.
If a market generates a side effect or externality, then free market solutions
are inefficient.
If a producer has market power (can influence the price of the product in the market) then free market solutions
are inefficient.
Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,
both Janine and Henry experience an increase in consumer surplus.
The _____ refers to the internalized, taken for granted values and beliefs that guide individual and firm behavior.
cognitive pillar
An increase in the price of a good along a stationary demand curve
decreases consumer surplus.
Joe has ten baseball gloves and Sue has none. A baseball glove costs $50 to produce. If Joe values an additional baseball glove at $100 and Sue values a baseball glove at $40, then to maximize
efficiency, Joe should receive the glove.
If buyers are rational and there is no market failure,
free market solutions are efficient.
If buyers are rational and there is no market failure,
free market solutions maximize total surplus.
An increase in the price of a good along a stationary supply curve
increases producer surplus.
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers .
The particular price that results in quantity supplied being equal to quantity demanded is the best price because it
maximizes the combined welfare of buyers and sellers.
Adam Smith's "invisible hand" concept suggests that a competitive market outcome
maximizes total surplus.
When the demand for a good increases and the supply of the good remains unchanged, consumer surplus
may increase, decrease, or remain unchanged.
The _____ refers to the coercive power of governments.
regulatory pillar
Producer surplus is
the amount a seller is paid minus the cost of production.
Medical care clearly enhances people's lives. Therefore, we should consume medical care until
the benefit buyers place on medical care is equal to the cost of producing it.
If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then
the cost of production on the last unit produced exceeds the value placed on it by buyers.
If a market is efficient, then
the quantity produced in the market maximizes the sum of consumer and producer surplus.
Imagine you are running a small home-based business selling software you developed. You are tempted to not report all of your sales so that you don't have to pay the full amount of sales tax required by law, but you don't want to jeopardize yourself or your business so you pay the full amount. Within an institutional framework, your behavior is influenced by:
the regulatory pillar.
If a benevolent social planner chooses to produce less than the equilibrium quantity of a good, then
the value placed on the last unit of production by buyers exceeds the cost of production.
In your country, you are prevented by law from charging your customers interest because it is forbidden in sacred texts. Your country is governed by:
theocratic law.
We can say that the allocation of resources is efficient if
total surplus is maximized.
