Ethics and Economy Final Study Guide
A critical and somewhat unique element of entrepreneurship (as opposed to basic managerial skills) is a) Leadership b) Risk taking c) Technology d) Political skill e) Teaching skill
b) Risk taking
What is the most likely result of a price floor (which is set at a price above the equilibrium price)? a) Shortage b) Surplus
b) Surplus
True or False: In (or around) 1800, Jean-Baptiste Say said: "The entrepreneur shifts economic resources out of an area of higher and into an area of lower productivity and greater yield."
False
True or False: In the ultimatum game the two players were free to keep negotiating until both were satisfied.
False
True or False: In the video about the "Magic Washing Machines" Hans Rosling suggests that the big concern with the hockey stick of population growth should be addressed by population control.
False
True or False: Recall the concept of opportunity cost. Now consider "consuming" something which is good for you, but which, if you consume too many "units" of it, that would be bad for you. The point of the law of diminishing marginal returns is to recommend that you should stop consuming any more units when that next unit would yield a negative "return" (i.e. utility, or happiness).
False
True or False: Since people tend to act in their own best interests, even if you clearly define property rights, and lower the cost of negotiating, those efforts are not as efficient as a central government deciding what is best for the public.
False
True or False: The #1 attribute of an entrepreneur is to keep working hard at something to never give up.
False
True or False: What we have learned about free trade is that, statistically speaking, it is a zero sum game: there are lots of winners, but there are also lots of losers.
False
True or False: When Friedman went to Hong Kong, he found that the people there increased their quality of life tremendously by creating goods and services for people who lived in Hong Kong.
False
True or False: In the trading bags game, we found that everyone is more satisfied, as the market pool increases
False (it eventually levels off)
True or False: "The world" (as the Bible defines it: fallen, material, not Godly) is most upset about the idea of natural law because if natural law were true, then humans would be subject to it, and there would be an authority which is higher than themselves.
True
True or False: An economy requires institutions to be profitable and sustainable.
True
True or False: Bastiat's hope in writing the "Candlemakers Petition" was for the French government to stop passing legislation that protected French producers.
True
True or False: Economics is a science- the study of human choices, of "growth," and of subjective motives/preferences which can be tested and predicted.
True
True or False: The concept of deferred gratification indicates that happiness in the future is, to some recognizable extent, dependent on the choice NOT to enjoy something in the present.
True
True or False: Without scarcity there would be no economics.
True
Jeff wants to purchase a double-double from In-n-Out. In-n-Out would be willing to sell this tasty burger for $3. The most Jeff is willing to pay for it is $8. The potential gain from trade-the sum of producer and consumer benefits- is $5. If the sales price is actually $4, how much producer surplus goes to In-n-Out? How much consumer surplus goes to Jeff? a) $1 goes to In-n-Out, $4 goes to Jeff b) $4 goes to In-n-Out, $1 goes to Jeff c) $2.50 goes to In-n-Out, $2.50 goes to Jeff
a) $1 goes to In-n-Out, $4 goes to Jeff
Which of the following is the best example of the law of supply? a) A sandwich shop makes more sandwiches when the selling price increases b) A supplier provides more shoes to local stores as prices of ladies shoes fall c) A catering company buys a new dishwasher to make employees' work easier d) A milling company builds a new factory to process flour to export
a) A sandwich shop makes more sandwiches when the selling price increases
Government controls may accomplish any of the following EXCEPT____________. a) Driving supply and demand toward the equilibrium b) Imposing tariffs on imports c) Subsidizing particular industries d) Mandating quotas on supply of certain goods
a) Driving supply and demand toward the equilibrium
When the price of cars decreases, the demand for tires is predicted to: a) Increase b) Decrease c) Remain unchanged, although tire prices are likely to fall d) Remain unchanged, although quantity demanded increases
a) Increases
Which of these actions would likely result in a decrease in consumer spending? a) Increasing income taxes b) Decreasing property taxes c) Decreasing government controls d) Balancing comparative advantage with opportunity cost
a) Increasing income taxes
When will people search harder for substitutes for oil? a) When the price of oil is low b) When the price of oil is high c) People are not usually incentivized to search for substitutes for oil
b) When the price of oil is high
The passage in Isaiah which is reflected in Adam Smith's famous book "Wealth of Nations" (1776) suggests that deriving materials from numerous foreign resources leads to: a) Incredible happiness for you b) The spread of wealth throughout the world c) Increasing poverty, since the rich get richer d) Environmental degradation
a) Incredible happiness for you
An important purpose of private property is to a) Internalize external costs and benefits b) Reward individuals who hurt for meat and fur c) Preserve status and class distinctions in society d) Legitimize the government
a) Internalize external costs and benefits
What is NOT true of a zero sum game? a) It is a "win-win." b) If there are two players, the gain of one player is equal to the loss of the other player c) It is impossible for both players to earn positive profits d) The sum of the payoffs for any given strategy pair is zero
a) It is a "win-win"
The most logical conclusion about modern labor, that most economists agree on, is: a) It tends to treat people simply like providers of labor b) It tends to make the rich richer, and the poor poorer c) It typically doesn't pay workers what they're worth d) It causes revolutions such that people want to forcibly take over their places of employment
a) It tends to treat people simply like providers of labor
Select the group that best represents the basic factors of production. a) Land, labor, capital, entrepreneurship b) Land, labor, money, management skills c) Land, natural resources, labor, capital d) Land, labor, capital, technology
a) Land, labor, capital, entrepreneurship
If you want to earn a high income you should figure out what others value because a) Others will be willing to pay you for what they value b) You will be able to gain at the expense of others c) You will not have to compete in the job market d) You will then be able to demand a lower salary than your competitors
a) Others will be willing to pay you for what they value
Using the concepts of marginal analysis, what decision would a producer make... when marginal benefit is LESS than the marginal cost? a) Produce less output b) Produce more additional units c) Decrease overall production d) Find additional capital
a) Produce less output
The following are all examples of transaction costs EXCEPT NOT: a) Product design b) Packaging in bubble wrap and cardboard box c) Shipping the product by Amazon truck d) Marketing
a) Product design
High transaction costs will tend to a) Reduce the number of mutually beneficial exchanges b) Lead to more specialization c) Increase the total gains from trade d) Increase the number of mutually beneficial exchanges
a) Reduce the number of mutually beneficial exchanges
What is the most likely result of a price ceiling (which is set at a price below the equilibrium price)? a) Shortage b) Surplus
a) Shortage
Aristotle's efficient cause has to do with what aspect of reality? a) That the person who makes something has to make choices b) That things are made of component parts c) That things are made for a purpose d) That things can be described by their shape
a) That the person who makes something has to make choices
When the price of olive oil goes up, what probably happens to the demand for corn oil? (assume they are substitutes, and that neither is inferior to the other.) a) The demand for corn oil increases b) The demand for corn oil decreases c) A change in the price of olive oil has little effect on the demand for corn oil
a) The demand for corn oil increases
If everyone thinks that the price of tomatoes will go up next week, what is likely to happen to demand for tomatoes today? a) The demand for tomatoes increases b) The demand for tomatoes decreases c) Expectations about the price of tomatoes has no effect on the demand for tomatoes today
a) The demand for tomatoes increases
A country's production possibilities frontier may shift inward as a result of a) War or natural disaster b) Increase in population c) Introduction of a new manufacturing technique d) Companies trying to make more profits
a) War or natural disaster
If a new law makes a desired good illegal, the quantity of the good sold will... a. Decrease and the price of the good will increase b. Decrease and the price of the good will decrease c. Increase and the price will decrease d. Increase and the price will increase e. Be zero
a. Decrease and the price of the good will increase
Monopolies and monopsonies gain market power by... a. Decreasing competition b. Increasing competition c. innovating d. giving products/services away for free
a. Decreasing competition
Prices under a monopoly tend to be... a. Higher than under perfect competition b. Lower than under perfect competition c. The same as perfect competition
a. Higher than under perfect competition
SolarWorld has asked the federal government to impose tariffs on foreign-made solar cells. SolarWorld wants a floor price for imported panels to be double the market price. Good economics suggests this will have a negative effect on all of the following people EXCEPT: a. Owners and employees of SolarWorld b. People who work for companies specializing in other forms of alternative energy c. Makers of foreign solar cells d. Buyers of solar panels e. This will have a negative effect on all of the above
a. Owners and employees of SolarWorld
Suppose two neighbors share a park. One neighbor, Fred, leaves trash in the park. This bothers the other neighbor, Bert. One condition necessary to fix the externality with minimal civil government influence is a. The park is privately owned b. Bert has a right to clean the park, and Fred cannot leave trash c. Fred has the right to leave trash, and Bert cannot do anything about it d. Fred is fined by the government
a. The park is privately owned
In regards to morally neutral issues (like what to buy on Amazon), people seem to be happiest when: a) There is only one choice, which appears to be the best! b) When there are a few choices c) When there are many, many choices
b) When there are a few choices
From the production possibilities frontier you can NOT derive which of the following? a) All possible allocations of ("ways to use") two resources b) All perfectly efficient allocations of two resources c) One best allocation of two resources
c) One best allocation of two resources
Companies often entertain their clients with very expensive meals, box seats at sporting events, and so on. At one point in U.S. history, companies could deduct 100% of those costs from their taxes. Since 1994, the federal government has allowed 50% of those costs to be "written off" (deducted) from their taxes. The most logical cause of the government allowing any benefits like this is... a. people in government are benefitting, in some way, from their relationships with business owners b. people in government are not acting rationally c. business owners do not care about being responsible with money d. business owners are not acting rationally e. none of the above is a logical cause of Congress allowing this subsidy
a. people in government are benefitting, in some way, from their relationships with business owners
Imagine that you can hire four minimum wage workers to move dirt with shshovels at $5 an hour each, or you can hire one skid loader driver at $24 an hour to move the same amount of dirt per hour. To save the most money in costs, who will you hire if the mimimum wage increases from $5 per hour to $6.50 per hour? a) 4 low-skilled workers b) 1 high-skilled worker
b) 1 high-skilled worker
One of the following will change people's plans to buy cars, while NOT shifting the demand curve in the market for cars. Which one best does that? a) A 10 percent decrease in the price of car insurance b) A 20 percent increase in the price of a car c) A 5 percent increase in people's income d) An increased preference for walking rather than driving
b) A 20 percent increase in the price of a car
Of the below, the best definition of institution, according to economics is: a) Buildings which form a campus of a corporation, whether for-profit or non-profit b) A social structure which influences their behavior and the way they live c) The way in which centralized government manipulates the economy d) The creation of any economic enterprise
b) A social structure which influences their behavior and the way they live
We are more able and likely to avoid dealing in dangerous markets when we... a) Are poor b) Are wealthy c) Have a barter economy d) Protect industries from foreign competition
b) Are wealthy
A technological innovation causes the production possibilities frontier to a) Contract, or shift inward b) Expand, or shift outward c) Stay in the same place d) Move into a new quadrant, chart, or axes
b) Expand, or shift outward
The math formula to express the utility of a thing or activity. Based on how we predict it will improve our lives in the future, is expressed as... a) RV=PV x F b) FV=PV x R c) V=RV x F d) FR=V x P
b) FV=PV x R
Which of the following is NOT one of Aristotle's Four Cases? a) Formal b) Financial c) Material d) Final
b) Financial
Adam Smith saw the potential to a) Equalize the distribution of wealth among all people b) Free common individuals from starvation and servility c) Place the most knowledgeable people in positions of authority d) Efficiently put the most people to work
b) Free common individuals from starvation and servility
If a country is producing a good represented by a point inside of its production possibilities frontier (not on the curve), then it... a) Is using its resources efficiently b) Is using its resources inefficiently c) May be experiencing economic growth d) May be trading with an additional trading partner
b) Is using its resources inefficiently
The worth of the second most valuable choice is known as a(n)____. a) Gain from trade b) Opportunity cost c) Marginal value d) Intrinsic value e) Market value
b) Opportunity Cost
Jennifer is on eBay, bidding to buy a first edition of Friedrich von Hayek's classic economic text, The Road to Serfdom. In this market, who is/are Jennifer's competitor(s)? a) The seller of the book she is trying to buy b) Other bidders trying to buy the same book c) Sellers of other copies of the book
b) Other bidders trying to buy the same book
Jon is in Japan, trying to get a job as a full-time translator; he wants to translate English TV shows into Japanese and vice versa. He notices that the wage for translators is very low. Who is the "competition" that is pushing the wage down? a) Businesses who hire translators b) Other translators, themselves c) Clients who need translators
b) Other translators, themselves
Hans Roling says that (2010-2050) the increase in energy use will come from: a) Population growth and increase in energy use per person, but mostly population growth b) Population growth and increase in energy use per person, but mostly increase in energy use/person c) Cheaper energy from hi-tech sources, which will lead everyone to use much more energy d) Actually, Roling thinks future energy use will decrease
b) Population growth and increase in energy per person, but mostly increase in energy use/person
Minimum wage laws are examples of (a/an)... a) Price ceiling b) Price floor c) Equilibrium
b) Price floor
What is the first thing that is most likely to happen, when consumers want to buy fewer scooters than a store has available for sale? a) Profits on scooter sales will be higher b) Prices of the scooters will decrease c) Manufacturers will stop making them d) Stores will make a different model
b) Prices of the scooters will decrease
Losses and business failures a) Illustrate why government subsidies are necessary, if resources are going to be allocated efficiently b) Will help redirect resources away from unproductive projects. c) Reflect that buyers value the product highly, compared to production costs d) Indicate that sellers are producing the commodity at the lowest possible cost.
b) Will help redirect resources away from unproductive projects
Which of the following is the best example of a choice based on objective value? a) You want to stay healthy and take a chewable vitamin C instead of drinking orange juice b) You want to stay warm and wear a jacket instead of shorts c) You want to be entertained and watch a movie instead of going for a hike
b) You want to stay warm and wear a jacket instead of shorts
Consider Ayn Rand's "Anthem" and its protagonist-hero Equality/Prometheus. If Jesus spoke with him, would the conservation result in a situation more like that which happens in a) the parable of the pearl of great price b) the encounter with the rich young ruler
b) the encounter with the rich young ruler
Monopolies arise and continue due to... a. Anti-trust Legislation b. Barriers to competition c. Lack of consumer interest d. Lack of governmental control of corporate greed
b. Barriers to competition
The Tragedy of the Commons can best be corrected by, a. breaking up communes b. internalizing the externalities c. providing government subsidies for the resource d. making certain everyone in the economy has equal access to the resource e. providing more of the resource for public use
b. Internalizing the Externalities
Output under a monopoly tends to be... a. Higher than under perfect competition b. Lower than under perfect competition c. The same as perfect competition
b. Lower than under perfect competition
The Tragedy of the Commons for grazing sheep on common land can be limited by a government doing all of the following EXCEPT a. taxing and regulating flocks of sheep b. subsidizing sheep flocks c. assigning and enforcing property rights of the land d. selling sheep-grazing permits by auctions e. The government never really benefits anyone in issues regarding the commons
b. subsidizing sheep flocks
Assume that the production of some goods creates pollution. The competitive market produces excessive pollution because... a. the firms place too high a price on society's cost of inflation b. the firms do not include the social cost of the pollution in their profit-maximizing decisions c. zero population is optimal d. people are not injured by most pollution
b. the firms do not include the social cost of the pollution in their profit-maximizing decisions
What typically happens? Monopolists charge a higher price when... a. customers have many good substitutions or b. when they have few good substitutions
b. when they have few good substitutions
Which of the statements below best illustrates the use of the market process in determining the allocation of scarce resources? a) "Let's make this product because this is what we know how to do best." b) "Everyone is opening video stores, why don't we?" c) "Although we're currently making a profit on the products we make, we should consider shifting to products where we can earn even more money." d) "We can't stop making this product. This product gave our company its start."
c) "Although we're currently making a profit on the products we make, we should consider shifting to products where we can earn even more money."
Which of the following statements about producers is FALSE? a) Households produce many goods and services for themselves b) People set up some producers who do not aim to make profits c) All the goods and services consumed in any country are produced by it's own producers d) Governments arrange the production of some goods and services
c) All the goods and services consumed in any country are produced by it's own producers
Economics analyze the production of goods based on a fundamental concept of economics, that resources: a) Are abundant b) Come into being c) Are scarce d) Are demanded
c) Are scarce
What explanation does NOT necessarily refer to the "hockey stick of human prosperity?" a) Economic development saw the wealth of nations in free trade instead of colonialism b) The curve is exponential c) Environmental quality suffers while humans rose out of poverty d) The poorest nations tend to benefit the most
c) Environmental quality suffers while humans rose out of poverty
There is an optimal maximum number of choices from which to choose (which may be one or seven or more), for all of the following reasons EXCEPT NOT this one... a) People tend to covet more when there are more choices b) People tend to become anxious when there are too many choices c) For people to be truly free and happy, there is actually NOT a maximum of choices d) Too many choices leads to making choices that are not the best, since those best ones are harder to find
c) For people to be truly free and happy, there is actually NOT a maximum of choices
For something to have value it must... a) Be priced appropriately b) Have an objective value about the subjective value c) Incentivize a buyer
c) Incentivize a buyer
To say that the demand curve is downward sloping means that: a) Less will be demanded at lower prices b) More will be demanded as the goods/services become more expensive c) Less will be demanded at higher prices d) Less will be demanded if the good/service decreases in quality
c) Less will be demanded at higher prices
Who ends up making deals? a) High cost sellers, and high value buyers b) High cost sellers, and low value buyers c) Low cost sellers, and high value buyers d) Low cost sellers, and low value buyers
c) Low cost sellers, and high value buyers
Which of the following is based on what you learned about the nature of creating art? a) Money is a necessary evil b) The love of money is the root of all evil c) Money interferes with the creative process d) Money is the best way to express the value of art
c) Money interferes with the creative process
In describing your Christian walk, Christ redeeming us in (x) and how we express that to others is (y). a) Objective, objective b) Subjective, subjective c) Objective, subjective d) Subjective, objective
c) Objective, subjective
Partnerships between business and government most usually benefit a) Buyers in the marketplace b) Most ordinary citizens c) Politically well-connected elites d) Potential small competitors of large monopolies
c) Politically well-connected elites
Which of the following absolutely must be part of every game theory model? a) More than one player b) Payoffs (what people benefit) c) Probabilities (likelihood of outcomes) d) Strategies (what people are thinking, when they make decisions)
c) Probabilities
Economics assumes people usually act in ways that they perceive to be in their best interest, which is... a) What Luther would say b) Irrational c) Rational d) Selfless
c) Rational
The "magic washing machine" is a metaphor for: a) American materialism b) Exponential population growth c) The electrical revolution d) Time and energy savings
c) The electrical revolution
In a free market economy, when consumers and producers compete and act in their own self-interest, which is most likely to be the overall result? a) That economy would have low inequality between the rich and the poor b) The consumer would pay relatively high prices for goods and services c) The producers would be most likely to earn profits, making products that people want d) Sellers would tend to take advantage of buyers
c) The producers would be most likely to earn profits, making products that people want
When goods are traded internationally... a. Only the buyer benefits b. only the seller benefits c. Both the buyer and the seller benefit d. Neither the buyer or the seller benefit
c. Both the buyer and the seller benefit
Chicken processors want the government to allow them to process 175 birds per minute (bpm) instead of the current regulation of 140 bpm. The National Chicken Council says, "This change will enhance food safety," whereas the Food and Drug Administration is not so sure. The problems in this situation are all of the following Except: a. the chicken businesses are concerned with the private marginal costs b. The businesses are focused primarily on profits c. Physical limits on technological advancements prove that the proposal is based on a lie d. The government is concerned with the social optimum
c. Physical limits on technological advancements prove that the proposal is based on a lie
Positive externalities are created when... a. farmers spray pesticides in their fields and it washes into the local river after the first rainstorm b. You purchase the Mona Lisa and lock it in a vault c. The student in your dorm brings an air purifier to college d. Other customers reduce their demand for coffee and the price declines
c. The student in your dorm brings an air purifier to college
The pursuit of self-interest in a "commons" where everyone has access to a valuable resource will cause... a. the common good of society to be realized b. careful conservation of the resource c. overuse of the resource d. individuals to make sure they bear the full costs of their actions e. a reduction in pollution levels
c. overuse of the resource
Economic progress comes primarily through a) Central planning b) Imposition of trade barriers c) Government investment in heavy industry d) Entrepreneurial action directed by competitive markets
d) Entrepreneurial action directed by competitive markets
To the buyer, which of the following are transaction costs? a) Paying search engines extra to have your product show up on more searches b) Creating a promo package c) "Word of mouth," or social media d) Just a price
d) Just the price
Which of the following best describes what was discovered through the Milgram experiment with principal-agent and electric shock? a) Obedience is most likely to occur when people are part of a group b) Obedience is most likely to occur when people lack rigid convictions c) Obedience is most likely to occur when people have a flexible self-image d) Obedience is most likely to occur when people no longer regard themselves as responsible for their actions
d) Obedience is most likely to occur when people no longer regard themselves as responsible for their actions
For the free market to work properly, all of the following are needed EXCEPT NOT... a) The freedom to compete b) A pool of sellers c) A pool of buyers d) Stated rules or laws e) Secure property rights
d) Stated rules or laws
Imagine you decide to produce a soccer ball for $35. Which of the following best represents the definition of the costs of your decisions? a) The time spent deciding how to spend your money b) Something else that could have been bought c) $35 cash d) The manufacturing costs plus the transaction costs
d) The manufacturing costs plus the transaction costs
For economics, the main concern about the Challenger issue (1986) is that: a) It wasn't challenging enough b) It was too expensive c) They didn't get the engineering right d) They made bad choices
d) They made bad choices
The problem of asymmetric information is that: a) We all have access to the same information, but we process it differently b) We all have different preferences c) We all have different talents d) We don't have access to the same information
d) We don't have access to the same information
A government best promotes and protects the people's happiness by generally... a. Encouraging monopoly and discouraging monopsony b. discouraging monopoly and encouraging monopsony c. Encouraging both monopoly and monopsony d. Discouraging both monopoly and monopsony
d. Discouraging both monopoly and monopsony
The Commons Problem arises because... a. firms don't maximize profits. b. social cost equals private cost, and property rights are missing. c. social benefit equals private benefit, and property rights are missing. d. social and private incentives are not aligned, and property rights are missing.
d. social and private incentives are not aligned, and property rights are missing.
In the presence of no externalities... a. social marginal cost and private marginal cost cannot logically be compared b. social marginal cost is less than private marginal cost c. social marginal cost exceeds private marginal cost d. social marginal cost equals private marginal cost
d. social marginal cost equals private marginal cost
In general, an externality is created... a. when firms have to pay for polluting the environment b. when the government subsidizes education c. when firms produce a product of low quality and the consumers don't like it d. when people are affected by a transaction that they were not part of
d. when people are affected by a transaction that they were not part of
Sugar is an important input in the production of cookies. If the price of sugar decreases, what would we expect to happen to the supply of cookies? a) No noticeable change b) Balances c) Decreases d) Disappears e) Increases
e) Increases