FIN 320F Exam 1 Study Guide with Complete and Verified Solutions

FIN 320F Exam 1 Study Guide with Complete and Verified Solutions Incentives - Answer️️ -Humans are evaluative: they evaluate potential courses of action by considering the positive and negative consequences of their actions Humans are Imperfectly Maximizing - Answer️️ -We play many different roles in our daily lives: student, mentor, husband, wife, significant other, worker, supervisor, family member, friend, citizen, customer, and more! In these different roles we make many decisions and seek to maximize our overall welfare resulting from these cumulative decisions Limited Resources: Time. Wealth, information, knowledge, Positive incentives - Answer️️ -___ motivate humans to take a course of action Wealth, Family, Prestige, Self-Worth and Spirituality Negative incentives - Answer️️ -___ motivate humans to avoid taking a course of action Legal Sanctions. Loss of Money, Social Sanctions, Physical Sanctions Imperfections - Answer️️ -Humans, as best they can, seek to maximize their welfare; however, humans lack the ability to get, absorb, or understand all information ©SOPHIABENNETT 2024/2025 9:45 AM Page | 2 Resources - Answer️️ -Physical or intangible assets that can be used to accomplish a goal. ___ are limited and decision makers are also constrained in their decision making by the resources available Resourcefulness - Answer️️ -Despite their limits humans operate in creative ways to expand their set of positive incentives and minimize the impact of negative incentives Confirmation Bias - Answer️️ -The tendency to process information by looking for, or interpreting information that is consistent with one's existing beliefs Economic activity - Answer️️ -The production, distribution and consumption of economic assets Economic assets - Answer️️ -Assets functioning as stores of value and over which ownership rights are enforced by institutional units, individually or collectively, and from which economic benefits may be derived by their owners by holding them, or using them, over a period of time Property rights - Answer️️ -The right to control an asset. This control includes how the property should be used, how the benefits from this use are distributed, and the ability to dispose of the asset. Efficiency - Answer️️ -Getting the most output from scarce productive resources Fairness - Answer️️ -The concept that all humans have value and should be treated equally and with respect. This implies a decent standard of living through the adequate access to economic assets Socialism - Answer️️ -A governmental system with a collective or governmental control of property rights. ©SOPHIABENNETT 2024/2025 9:45 AM Page | 3 Capitalism - Answer️️ -A market economy where individuals control property rights, especially the right to control assets used to produce society's economic assets Corruption - Answer️️ -Dishonest or illegal activity by persons in authority, especially political leaders, government administrators, judicial officials and police Mixed Economy - Answer️️ -Most countries do not have purely capitalist or socialistic societies but rather have a ___ in which government and markets interact Today the U.S. and other major economies are neither pure socialist or pure market, but rather ___ where private property rights are respected and businesses have substantial economic freedom to operate, but where governments do intervene in economic activity in order to achieve social goals. Three Key Roles of the Government - Answer️️ -Enhance the welfare of its citizens. - Governments should also provide a framework within which economic activity can occur, such as effective transportation, communication, and educ